Finding the Best Locations for Buying Rental Property That Nets the Highest Returns

Turnkey-Rental-Property

You have heard it before. T, the first three rules of real estate are Location, Location, Location, and this is no different when buying rental property. If you are in the market to purchase rental property real estate, you need to know your market. Below is a series of steps you can take to fundamentally understand your real estate market and determine the best areas in which to purchase your buy and hold properties.

Establish Where the Rental Markets Are

Here is a systematic way to figure out which rental markets in your area will have the highest potential returns.

  1. Have a realtor put together a list of properties that have sold in your area. You are going to want to find sales data on “bread and butter” rental properties – properties with 3 bedrooms, 1 bathroom, 800sq ft – 1200sq ft with a basement and a garage.
  2. Take the list of properties and sort them by sales price.
  3. Once you have the properties sorted by price, break them up into 3 groups – the lower third by price, the middle third by price, and the upper third by price.
  4. Next, take a map and start to plot out the three groups of properties. For each group use a different color marker on the map.

Once you have the map populated with, you should start to see trends on the map. The properties priced in the lower third will likely have the potential to generate the highest return. These are the areas you are going to want to investigate further. If you have lived in the area, you probably have a general idea about these areas, but you need to set that aside for now because to truly know the market you need to complete the next steps.

Drive the Targeted Market

Once you have established a few areas, you are going to want to get in your car and drive through the neighborhoods. When you do this, you need to take note of the things listed below. Please keep in mind that you should be looking for trends in the area. You may see one house that is particularly good or bad, but you are really trying to look at the neighborhood in general, so look for trends.

What is the condition of the homes in the area?

Do you see solid homes, with good roofs and freshly painted trim, or do you see you see old dilapidated homes with broken windows?

Are the properties kept up?

An easy way to tell this is by looking at the condition of the landscaping. Do you see mowed lawns with flowers planted all around, or do you see long grass and overgrown weeds? The condition of the landscaping can provide a great deal of insight about the people living in that neighborhood.

What does the neighborhood look like?

Look at the streets, are they clean, or is there trash strewn around. Look for sidewalks. If you are driving around outside of school hours are kids playing in the streets? Or in contrast does the neighborhood give you the creeps. You are really looking to answer the question “Do my tenants want to live here?”

Talk to People in the Neighborhood

It is really a good idea to speak with people in the neighborhood. If you see someone walking down the street, stop and let them know you are looking to buy real estate in the area and ask them about the neighborhood. Or, you can stop in a local business like a market or a gas station and talk to the guy behind the counter about the area.

Once you have established your target markets, and driven the areas, you should be able to quickly see which markets you want to invest in, and which markets you do not. To document this you can easily take a map and highlight the streets where you will consider investing.

Determine the Returns

The next step is to look at the potential returns you will generate. This is a very simple thing to do, and you can follow these steps.

  1. Speak with a local property management company about the rental rates for a 3 bedroom, 1 bath home with a garage and a basement in the area you have selected. The property management company should be able to give you a very good idea of the rental rates and also give you some more feedback about the area in general. You should also inquire with them about their rates for property management.
  2. Look up the taxes on a few properties to establish what you can expect to pay in taxes for properties in the area you have selected.
  3. Speak to an insurance agent about the cost of insurance for a property in your target market.
  4. Calculate your net income. To do this, simply take your rental income expected for the year and subtract the taxes, insurance, and property management expense.
  5. Calculate your return. To do this simply divide the net income you calculated in step 4 by the price you will be paying for the property.

With this information you should be able to see what kinds of returns you can generate for your targeted area. An interesting exercise to perform is to also calculate your return on areas where homes are selling at a higher price. What you will find is that the neighborhoods may be a bit nicer, but your returns are going to drop quickly.

 


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

How to Analyze a Rental Income Property

How to Analyze a Rental Income Property

It has been said that more millionaires have been created through investing in real-estate than any other type of investment. However, for the unprepared and uninitiated, the potential for catastrophic financial decisions is always present. In this next article in our series, we’ll look at some of the key location factors that influence the value of residential investment property.

The single most important factor influencing the value of your residential investment property is consistent and strong demand from your potential renters and buyers. So it stands to reason that you should be buying rental properties in same places that people want to live. Although this sounds simple, too many new investors fail to consider the long term potential of the area when getting started with real-estate.

State Level:

State regulation and fiscal policy has a great deal of influence on a residential investment property. State business and personal income tax, as well as goods and services sales tax can have a huge impact on the in-migration of people and business. More regulation and taxes means fewer businesses and jobs. Fewer jobs means fewer people, fewer people means less demand for your property (i.e. lower rents, lower property appreciation and lower return on investment from your rental property). When investing in real-estate, consider States with strong, pro-business policies.

City Level:

As your geographic location begins to narrow, the location factors affecting your residential investment property start to become more specific. Although a city’s policies on attracting and retaining business is still very important to the long term outlook for jobs, immigration and in-migration, more local factors like large regional employers and a diversified industries become increasingly important. When buying rental properties and considering specific cities, look for an unemployment rate that is less than the national and state average. Also look for higher than average household income (national and state). Strong local employment and higher than average incomes means the area is growing and this will ultimately attract more people.

Neighborhood Level:

As you begin to narrow down the neighborhoods within your selected city, there are several factors that will impact your real-estate return-on-investment. Proximity to schools, shopping, business and transportation should all play a role when buying rental properties. Consider the city’s expansion plans for any light rail public transportation. Historically, investing in real-estate near (but not too near) the future site of a transit station has produced properties that have appreciated at a much greater rate than average. From the household shopping to the daily work commute, relative location and access to transportation are some of the most significant factors people consider when choosing where to live and should be a major factor in your decision when buying residential investment property.


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

Why You Should Never See Your Investment Property

Why-You-Should-Never-See-Your-Investment-PropertyWhenever I give this piece of advice, I often get blank stares. It is a very different approach to what most property investors take. But it is actually a smart strategy when you start to understand the reasons why.

But so what if you visit your investment properties?

Sure, if you’re okay with getting the results most investors get, feel free to ignore my advice and do what most investors do. But if you want to go further than most investors, I strongly recommend you stick to this rule.

Never see or inspect your own investment property.

A good investor never visits their property, as a general rule. In fact, you don’t even need to live in the same state as your property.*

* Side note: this is actually very exciting as it means you are FREE to invest anywhere in the country, opening up way more options for awesome locations. But that’s another topic entirely.

Why You Should Never Inspect Your Property

  • Before you finalize your purchase of the property, you’ll get a good building inspector to check it. They’ll do a far better job than you could ever manage, so checking the property yourself is a waste of your precious time.
  • Once the property is in your hands, you’ll get a good rental manager. It is their job to routinely inspect the property. As a professional, they will do a far better job than you could.
  • You should have full confidence in the professionals you hire to take care of your property for you. If not, you have the wrong people.
  • Inspecting the property in person will result in emotional attachment, which is bad for financial-based decision making.
  • Your time is worth more than that.
  • The real money is made in capital growth, something which you can’t see at an inspection.

So get the professionals in and get them to do it. It’s their job! Stay emotionally detached from the property and focus on making money – YOUR job as the investor.

Just because you shouldn’t visit the property in person, doesn’t mean you should ignore it. You should be looking ahead to see what the market is doing and anticipating what your capital growth is likely to do in the future. This will help you with growing your portfolio, which is how you really make money.

The exciting part is that you can do all of this online.

How to Inspect for Capital Growth

  • Check online sources for evidence of infrastructure projects and investment in the area
  • Is the population growth trending upwards?
  • Are more jobs being created?
  • What notable changes are happening in the area that might attract more people?

Inspecting Your Property is a Waste of Time

And sure, you could stop by your property and have a look. But what are you going to see? A house? Yep.

If you actually happen to notice any problems while you are there, you’re very unlikely to be able to solve them, unless you’re a qualified builder. And because you lack the qualifications and experience of a rental manager, you probably won’t understand the laws that govern how you should deal with your tenants. It’s best to avoid wasting your time and effort and let the professionals handle it.

Even though it sounds counterintuitive at first, it makes sense to never inspect your own property.

If you feel that you need to inspect your property, something isn’t right.

Perhaps you’re in a situation where things aren’t going as smoothly as they should. Or perhaps your team aren’t doing their jobs right.

If you’re struggling to find a good building inspector or rental manager, or your properties are causing you problems that you feel need your personal attention, find a good property investment coach to help you solve these problems as soon as possible.


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

Finding Real Estate Investment Property – Hidden Gems

finding-real-estate-investment-property

Investing in Real estate can be a satisfying and profitable endeavor even for those who are just starting out if they know what to look for. The key is finding property that has real potential that others have overlooked without laying out too much cash in the beginning. Although there are lots of books, websites and seminars to guide you, sticking to some basics is still essential.

Maximize your information sources by using all available options. The Internet has hundreds of sites advertising real estate for sale, many of them by-passing realtors in order to save cash for both the buyer and seller. Google Base, Ebay, CraigsList and numerous others have houses listed For Sale by Owner (FSBO, a term you’ll quickly become familiar with). Don’t neglect property listed with realtors, though. Get to know realtors and let them know you’re seeking those hard to sell properties that need some work – they will often lower their commission to sell a house that’s been hanging around for a while.

Always, always visit the property yourself to evaluate it. No amount of pictures can substitute for walking the property yourself and seeing the rooms, fixtures and neighborhood up close. If you can, visit on two days – once during bad weather so you can check the basement, eaves and roof for signs of potential problems. Introduce yourself to the neighbors and get a feel for what the area is like – is it mostly retirees, or families with young children? This information will be invaluable down the line when you begin remodeling if you decide to purchase the house.

If you find problems like older pipes and wiring while checking out the property, you’ve given yourself some real bargaining power when it comes time to make an offer on the real estate. These are often the properties that can turn into a great profit margin. By pointing out potential problems (“I’ll need to upgrade all the wiring, and those pipes have had it.”), you may get the price reduced even further, or you can negotiate to have that work done at the owner’s expense before you’ll close on the house.

A complete home inspection is always a must – the report the inspector provides can point out other problems you, as a lay person, may have missed. This can mean the difference between purchasing a basically solid house that you can turn into a real gem and buying a house that looks sound but will end up being a money pit of repairs and major reconstruction! The report will cover details from leaks, carpet and floor damage to problems with the foundation or heating system. Be sure to determine what things are deal-breakers – talk to an expert about whether flaws are worth repairing, or are too major to be dealt with.

Some repairs should always be done by an expert, such as heating and air conditioning problems, repairing chimneys and flues and anything to do with the foundation of the house. Others, however, you can do yourself if you are handy yourself or are willing to learn. Fixing leaky faucets, repairing minor leaks, patching drywall, even refinishing floors can be done yourself at a greatly reduced cost – and can give you real bargaining power on the price when negotiating with the seller (after all, he/she doesn’t need to know you’re going to do it yourself!). Keeping these tips in mind will help you keep things realistic and maintain focus as you look for that hidden gem that you can turn into a showplace.

Article Source: http://EzineArticles.com/275627

Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

Tips For Buying Investment Property

buying-investment-propertyBuying an investment property single-handedly could be a complicated and overwhelming process, especially if it is overseas. Some of the hurdles you might face through the process include,

  1. Choosing a favorable neighborhood
  2. Selecting the right property with all the desirable amenities nearby
  3. Allocating enough time to contribute to all aspects of buying
  4. Analyzing the prospects of the house
  5. Fixing the right budget
  6. Succeeding to fix a desirable price
  7. Understanding and performing paperwork

These are some of the issues you have to face if you plan to buy it on your own. Without a realtor you might end up paying a fortune for a house that is nowhere near to deserve a price like what you actually spend. So the number one tip would be to get the job done from reliable realtors who have the experience and expertise in handling investment property of all sorts.

Here is a quick guide to help you get through the process of buying a worthy investment property anywhere in the world.

Finding the right property

When you decide to buy a house, condo, townhouse or a vacation house for an investment property, give more importance to the neighborhood quality than the size of the home. Another aspect that you probably should vote for is for a house that favors a shorter commute to the city’s main locations.

Determining affordability

Don’t go overboard as you come across various properties. Be clear with your priorities among which your budget should be your primary concern. Hire a realtor who has vast knowledge of his sector and is efficient in the process of not only finding your dream property but also closing the deal for an affordable price. A realtor with such credentials will be able to determine your affordability Vs the cost of the property.

Determining comparable properties for sale

Instead of blindly playing by the rules, follow your instincts by comparing the cost of the property that you select with all the other similar types of properties in that locality. Your realtor would able to assess if the property that you have selected is worth the quoted price.

Accurate documentation

If you are a first time buyer, especially if you plan to purchase an overseas property, you have to be clear with the analyzing and performing of all the paperwork and documentation. If you find it beyond your realm, a realtor on the other hand would be well-versed in what is to be done and also makes sure if it is done correctly.


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

Buying a Property With Tenants

buying-a-property-with-tenants

So, as a buy-and-hold landlord, you’ve found a property to purchase that already has a tenant in place. Is this a good thing? It can be.

Ideally, the value of buying a property with a tenant in place is that the property is already cash flowing and you have income from the day you close on the property. However, you don’t want to take that for granted. So how do you know for sure?

Ask the seller for all rental contracts.

In this type of purchase, the tenants and contracts pass to any new buyer and the new buyer must abide by the terms of the contracts already in place. Often, seller rental contracts are very bad or even non-existent. You want to know the details and you want to see them before closing on the purchase. The seller should be giving you tenant information, but be sure to see what they have agreed to in writing – what they have signed, if anything – because you are legally bound by their existing contracts.

Ask for documentation of tenant payment history.

Do they pay on time? Do they pay at all? Part of the value of purchasing a property with tenants is income stream. Does it actually exist? Taking on existing tenants can be a real benefit, but it can also be an eviction nightmare. Does the seller have any kind of documentation to prove what the tenant performance has been?

Be sure the tenant’s security deposit transfers to you at the time of closing.

The tenant’s security deposit belongs to the tenant, not to the landlord. That’s why any time a property is sold with the tenant living in it, all contracts the tenant signed are still enforceable and any monies they put down to live in the property must transfer to stay with the tenant. Money to cover certain property damages can be withheld from the security deposit when the tenant moves out, but any security deposit money taken before that time or used for other purposes by the landlord is stealing. Be sure the deposit transfers at closing so you have money to cover tenant damages and/or to return to them when they move out. You, as the landlord are legally bound by the terms of the rental contract they signed, by the way, so you will be responsible to refund their security deposit and/or pay damages when they move whether or not you received it from the seller at purchase.

Be sure the tenant is informed of the sale and where they should begin sending their payments after you’ve closed.

Too many times the tenant continues to pay the old landlord (because they aren’t informed they have a new landlord) and you can be left with no payment and/or trying to get what’s rightfully yours back from the seller. Not a great start with your new tenant.

Don’t be disappointed if negotiations take extra time on a purchase with a tenant because of the need to provide these additional documents. The most important thing is to be thorough. If there are holes in the deal, you want to close them before the purchase, not be taken down by them afterwards.


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

International Property Investment in Memphis

memphis

While international investor are likely familiar with America’s coastal cities, the mid-west remains a bit of a mystery. International investors as a whole seem to be less willing to enter these markets, not due to some weakness in the fundamentals of these economies, but because investors are unwilling to leave their comfort zones. Images of Californian beaches or the lights of Las Vegas bias investors towards risky and highly competitive markets. For investors willing to go the extra mile and research cities a little further inland, there represents an opportunity for massive returns at very little risk.

With a population of over 1.3 million inhabitants, Memphis is the second largest metropolitan area in Tennessee. Unlike many of the markets in which US Invest operates, Memphis’ affordable housing prices are not directly connected with the speculative craze which rocked the US property market. Memphis was affected mainly by the slowdown in the macro business environment that resulted from the financial crisis. This is because Memphis is an economy which is concentrated in sectors which are procyclical in nature.

Memphis’ economy is concentrated in two main sectors: the Trade, Transport & Utilities sector and the Business and Professional services sector. Both of these sectors move very closely with the health of the macro economy. As an international investor, this proves to be a rare and valuable attribute. Since Memphis’ economic health will mirror that of the US economy as a whole, it will be very easy to monitor your investment. This will prove invaluable when deciding to exit the market. Instead of having to dig up information specific to Memphis, you need only to track articles which cover the health of the US economy as a whole to predict how your investment will perform.

Memphis is one of the nation’s largest distribution hubs, since it lies within 500 miles of nearly 1/4 of the urban working population of the United States. This has prompted many Fortune 500 companies to open assembly plants in Memphis and it is the reason FedEx has chosen Memphis as its global headquarters. A thriving business services sectors has sprouted up to service the needs of the local operations of these major companies.

At the end of the day, Memphis’ strength lies with the reliability of the economy which stems from solid investment in its infrastructure and its strategic geographic location. As long as international commerce necessitates the transportation of goods and materials, the Memphis economy will remain strong and flourish.


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com