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

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

Is Out-Of-State Real Estate Investing Right for You?

memphis-buy-and-hold

Have you made up your mind to start investing in real estate, but you’re torn in deciding where to invest?

Are you thinking about making a local investment, but wondering if an out-of-state investment might be better?

This is one of the first of many choices you’ll have to make when you decide to invest in real estate: the simple question of where you should invest your hard-earned dollars. While there are definite benefits to investing in your area, there are also some potentially profit-limiting downsides.

That’s not to say investing in outside areas doesn’t have its own pros and cons. Let’s take a look at both and see why out-of-state real estate investing might be a profitable option you have not yet explored.

Investing Locally

This is the most obvious choice for many real estate investors, but is it really right for you?

If you choose to buy a property local to you, you’ll rest easier about your investment since you know the market. First, you know your competition. You might know the names of professionals you can trust and you’ll have an intimate understanding of what the cost of living is for that area and how to make things more affordable.

Second, if you like to be hands-on, it will be much easier for you since you’re right there. If you want to see the property, it’s just a short drive away. If you want to talk to the property manager face-to-face, you just put it on your calendar for the end of the day.

Drawbacks to Local Investments

On the other hand, investing solely local can narrow your options. Not every market has the inventory of good investment opportunities that you can avail yourself of if you invest out-of-state. The local inventory of available properties may or may not be big enough or well-suited for investment opportunities.

You also run into the problem of whether your local market is the one you want. The recession made a huge impact on housing markets throughout the country and some areas have recovered at different paces than others. You might find yourself out-priced in your current market, but even if you aren’t, you might not be able to see a favorable future where you’re at.

Investing Out-of-State

If you decide to invest out-of-state, you can greatly increase your options. You can literally choose any location, any market and invest in properties there. Whether you want to invest in Florida vacation homes and coastal villas or homes in the suburbs of Detroit, the sky’s the limit. You can make your investment fit your price point and interests.

By investing out-of-state, you can put your money to work in markets with high ROI. You pick and choose which markets you’re interested in, and which ones are rising stars in the real estate investment scene, ignoring your own market’s changes.

Investing out-of-state also allows you to scale based on your needs. For many would-be investors, their local market is priced too extravagantly to make real estate investment prudent. The cost of living in a different state, just a few borders east or west, might be considerably lower. That means you can snatch up excellent properties at a much lower cost than you might in your own market.

Even better, you can snag those investment deals on excellent properties that would go for three to four times as much, if not more, in your own local market. Your purchasing power becomes much stronger in other markets, because everything’s relative.

Challenges of Out-of-State Investments

There are still some challenges to these remote investments. First of all, you have to learn who you can trust and maintain the peace of mind that comes from having easy local access to your investment. You also have to be able to trust that the property you’re investing in is what it’s advertised as.

The property is also more difficult to visit if you like to be hands on. You might have to fly out to visit the property, which some people enjoy but others are seriously bothered by. If you are the type of investor who prefers the more passive turn-key approach, this is an excellent opportunity.

Finally, the market won’t be what you’re used to. Nothing will be quite the same as being there and immersing yourself in the market, but you can learn and study. You just have to rely on someone else to have knowledge of the nuances of the market.

Doing Out-of-State Right

There is a solution to all of the challenges of real estate investing outside your state. When you find a reputable, proven company to handle your turn-key real estate transaction, you have someone you can count on to know the market you’re investing in. Here are the main reasons you should find a partner to work with you on your out-of-state investments.

They can keep a more educated eye on the market, since they know all of the nuances of that area.
They’ll serve as your presence near your investment, keeping everything on track, so you don’t have to make numerous trips to the property.
If the turn-key real estate investment firm is reputable, they want you to succeed. This means they’ll do anything they can to make sure you do succeed.
The question becomes, whom can you trust? You want to make sure you engage in a partnership with a firm who is reputable, knowledgeable and engaged in your market. Referrals from other investors are key, so be on the lookout for like-minded people who have been there and done that.

You should also investigate what the turn-key operation offers you, and what their fee or cut of your profit is. Ideally, you’ll want a partner who can help you throughout your investment life cycle, from acquiring the property to managing it.


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

Memphis – The Perfect Storm for Cash Flow

Memphis

The city of Memphis is located on the Mississippi River in the southwestern corner of the state of Tennessee.   This city is a regional hub for an area comprising of northwestern Mississippi, southeastern Arkansas, and southwest Tennessee.   Memphis is known as America’s Distribution Center and his home to the busiest air cargo airport in the world.  Its central location and significant transportation infrastructure is one of the reasons that Expansion Management Magazine ranked Memphis the #7 place in America for business expansion in 2005.

The city’ population is 680,000 making Memphis the 17th largest city in the country and the largest city in Tennessee.  The metro area has over 1.2 million residents.  The city is intersected by two major interstates, I-55 and I-40, and will soon be home to the new Canada to Mexico shipping route, I-69.  Additionally more major metro areas can be reached overnight from Memphis than any other city in the central US.   This makes Memphis very attractive to companies looking to expand in the light industrial warehouse sector.

The overall cost of living is 10% below the national average, while the housing market is 15% below the national average.  This coupled with no state income tax makes Memphis a very affordable place to live.  Additionally it is important to point out that an amazing 41% of homes in Memphis are rented.

Memphis boasts a burgeoning business community flanked by Fortune 500 companies; FedEx, AutoZone, and recently relocating to Memphis:  International Paper.   These companies are all headquartered in Memphis.  Also Memphis plays host to a rapidly expanding biotech market.  Memphis recently appeared in the top 10 of  Inc Magazine’s best places for starting a business.

The lifestyle in Memphis is centered around great food, good music, friendly folks, and a cool vibe.  Many of the new creative class generation are relocating to Memphis to enjoy a city that seems to be at the cusp of significant growth.

Investors purchasing property in Memphis are often able to find good value and positive cash flow.  Throughout the real estate boom nationally, Memphis growth has remained around 3-5%.  This has provided investors with great opportunities in many parts of the city.  Most investors in the Memphis area are pursuing a purchase and hold strategy for cash flown, although some parts of Memphis are experiencing significant appreciation; namely Downtown Memphis.  The steady home sales, and good economic outlook leads many to predict future appreciation for the Memphis metro area to pick up steam.

Overall, the low housing costs, high numbers of renters, and positive economic forecast, make Memphis a perfect storm for many investors seeking positive cash flow.


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

Strategies to Become a Successful Investor

Successful-Investor

Real estate investing is one the pillars of wealth creation in the world today. The last time I looked at the Forbes list of 400 richest Americans, I could still count over 31 tycoons listed as billionaires.

In the same vein, you have individuals in your city and state who have made their fortune and hold their wealth in property investments.

Why you need to invest

In his essay “Theory of Human Motivation” first published in 1943, Abraham Maslow, father of behavioral psychology observed, that people are motivated to fulfill three basic needs. The three basic human needs are food, shelter and clothing. And many people will try to fulfill these three needs, before any other need.

When you invest in real estate, you add value to your customers in one of the important area of human needs-shelter. You are investing in an evergreen industry.This is why, I believe you should include property investing as part of your wealth-building portfolio.

However before you go out and buy your first property you need to have the right plan of action to succeed. The first thing you have to be aware of is that…

Goals are important.

Your need to know, what you want to accomplish:

Are you looking at wealth accumulation within a short time frame (3-7 years)?
Are you investing for the Long term (retirement)?
Do you want be a Full time investor and derive all your income from your real estate investment?
When you ask yourself these critical questions, you are able to focus and achieve your dreams.

You need to develop critical success traits.

It is important you develop or become aware of the traits, you need to win as a real estate investor. Five main traits are important for success:

  • Competency in your niche, this means you know about the basics, at the minimum and then become excellent in the niche you decide to invest.
  • Control over your emotions. This is important if you are going to stay in the investing arena for the long haul because there will always be difficulties in the real estate market. The difference between a novice and a professional is the ability to ride the eye of the tiger without getting into the belly of the tiger. Being a real estate investor takes guts and you need to have them if you want to become wealthy.
  • Comprehension. This means know your market cold. You understand who your customers are, what they are looking for, why they want to deal with you. If you lack these key trait-insight into your market-you are doomed to fail.
  • Consistency. This means you have focus and discipline to, take action daily, weekly until you accomplish your goals.
  • Integrity. You stay true to your principles, because integrity is important in real estate. This means you are trustworthy, to your bankers, investors and tenants.

Strategy vs. tactics

The strategy (what to do) is more important than the tactics (how to do) of real estate investing. Let me explain.

If for instance, you wanted to gain wealth in a very short term then to buy and hold real estate, which is a long-term strategy-will not be the right strategy to achieve your goals. Flipping and wholesaling properties- buying undervalued properties and selling at a higher price to gain profit-may be the best strategy.

Knowing enough vs. Knowing it all

I think it’s important to have an understanding of real estate investing, however you don’t need to know all about real estate investing to start.

You need to one thing that I think is important for an investor… You need know enough about the basics-how to analyse properties, how to get financing, and how to assemble you real estate team together. That is it.

If you wanted to make a full time career as a real estate investor, then you would have to know more. You would have to specialize in a niche.

I am not going to spend many hours learning about short sales, wholesaling and foreclosing investing especially if I am not going be a full time investor. It would be counterproductive for me, when I should spend my time doing what I am best at doing.

Let’s recap, to succeed investing in real estate…

  • You need to understand why you are investing in real estate.
  • You need to develop critical traits for success as a real estate investor.
  • You need to choose the right tactics to match your investing objectives.
  • You need to know enough about what you want achieve

This is how I have applied myself to real estate investing. Moreover, it has helped me transform my losses to wins and I enjoy the cash flow from my properties,with the knowing I will become financially free.

Article Source: http://EzineArticles.com/6054300


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

ABCs of Multi-Family Property Investment

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Multi-family real estate is a hot commodity these days. From institutional investors to the first time buyers, multi-family housing is considered a smart investment. Why?

For starters, the multi-family real estate market has not seen the same downturn as the other real estate market. Apartment housing has been in high demand over the past few years since many home owners have faced foreclosure and cannot afford single family housing. Additionally, multi-family housing offers an income annuity.

According to Findthedata.com, a marketing research company, the average rent for a 1 bedroom apartment in the United States is $800 per month. Certainly, rent varies by market size (rural and urban) and by quality, but selecting an investment property in a desirable area or high-need community will create an income stream for years to come.

When investing in multi-family real estate, it is important to recognize that not all properties are created equal. Doing your homework to understand the general state of the property and surrounding area is an important step to fully vet your investment requirements. Assessing a building includes items such as current and potential net operating income, repairs needed, structure, location, size, amenities, general condition, security, aesthetics, neighborhood trend, etc.

The good news is that the industry has created the following grading standards when classifying apartment buildings. They are Class A, B C or D.

Class A buildings are typically new, larger apartment buildings in prime locations. They are usually less than 10 years old and include a number of desired amenities like in-unit washer/dryers, pools, gyms, and the latest technology. These properties are usually targeted by Institutional investors and while they generate less immediate cash flow they have a greater long-term appreciation potential.

Class B buildings are older, typically 10-20 years in age. While they are more outdated, they are generally located in good areas with some of the basic amenities noted above. Class B properties are often owned by large investment groups.

Class C are older properties built within the last 21-30 years. They are usually located in working class areas and attract primarily blue-collar workers and even some subsidized tenants. While these properties may be in declining, less desirable areas, they are not necessarily in dangerous communities. The apartment units in Class C buildings are considerably smaller than those in higher graded properties and boast fewer amenities. However, the demand for affordable housing in low-income neighborhoods creates a higher occupancy rate for a Class C property. As a result, the cash flow is positive while the appreciation value may be lower over the long term.

Class D buildings are often considered deteriorating because these properties are older, and located in declining (sometimes less safe) areas. Class D buildings are usually in poor condition which means they have outdated features, and are in need of maintenance to attract tenants. As a result, the vacancy rate is often higher. This requires more hands-on management to oversee the property. All these conditions will negatively impact free cash flow available to the investor.

As an investor, finding the ideal location can sometimes be more of an art than a science. Yes, there is a structured approach to identify properties for sale. You can attend public auctions; work with commercial brokers/bankers; subscribe to real estate trade magazines and network with other industry experts to identify your next purchase. For Class A and B, these traditional approaches are most common.

However, there are many properties (Class C and D) which are not marketed aggressively. These properties are under the radar. They are not marketed aggressively for sale often because the owners are inexperienced or lack motivation to sell. It could be family owned or a group of investors that are at odds on how to sustain the property long term.

This is where personal tenacity and creativity can make the difference. Network with local building managers, drive around the community and communicate your investment desires. The “grapevine” can be a tremendous source for sharing information.

Once you have identified a location that appeals to you and your investment style don’t be afraid to approach the owner. It certainly can’t hurt to test the waters. And while that location may or may not be readily available for purchase, you may find that the owner is aware of other locations in the area that are equally as desirable and within your reach.

In closing, finding the right investment property is the first step to a whole new adventure. Whether you are an institutional investor seeking Class A or B properties or an independent investor seeking the high reward/high risk of Class C and D properties, there is no shortage of options for you to consider. Keep in mind that picking what you want is the easy part. Actually raising capital and structuring a deal is often the biggest hurdle for investors. With bank loans more stringent and credit requirements tighter than ever, “showing the money” can be a quick end to your investment dreams.

Article Source: http://EzineArticles.com/7534132


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

Spring Maintenance Checklist for Rental Properties

Spring-maintenance-checklist

The cold and dark months of winter are behind us and its time to use the extra daylight and warmer days to take care of some much-needed home maintenance. Keeping on top of your home’s maintenance will ensure everything is in working order, improve efficiency and prevent bigger and often costly problems from occurring.

Inspect your gutters and downspouts.

Over the fall and winter all kind of leaves, pine needles and other guck has probably accumulated in your gutters and downspouts.  Even if you gave them a thorough clean in the fall, the build up of ice and snow could have caused some damage. First walk around your house and make sure nothing has detached or come loose from the house. Then head up to your roof and inspect the inside of your gutters. Scoop out any build up that might be in there so you can ensure smooth drainage away from your house. It also important to make sure your downspouts are aiming away from your house and clear of debris.

Inspect your roof.

While you’re up on your roof, take a look at your shingles. Are they curling, have pieces torn off or are there any missing shingles? If so, it is probably time to consider installing a new roof. You should also check around any chimney’s or vents to make sure there is no damaged or loose flashing. If you do need a new roof, do not put it off. Should your roof take on water you could end up with expensive water damage to your home. If you are preparing your home for resale, a new roof will be more attractive to potential buyers.

Inspect your windows and doors.

Check around your windows and doors for cracked caulking. If it is cracked, scrape off the old caulking and replace it with new. If your window frames are warped or look damaged, it might be time to consider replacing them completely. New energy efficient windows will help keep your home cool in the summer and keep warm air in during the winter and are a sound investment. New windows and doors can also improve your home’s resale value.

Inspect the concrete around your home.

The constant freezing and thawing during the winter could cause your concrete on your drive, walkways or even your foundation to crack. If you have cracks in your foundation you should fill them or call a concrete contractor to do repairs as soon as possible. With spring and summer rain, you don’t want water to get into your house and cause serious damage to your property.

Service your heating and cooling system.

Your furnace has worked hard all winter to keep you home warm. Use this time to have it inspected by a HVAC technician to ensure it will work safely and efficiently for the year to come. You should also have your air conditioning unit inspected. A heating and cooling contractor can make sure the coils and filters are clean and that your unit is working at peak performance.

Inspect your attic insulation.

Upgraded attic insulation, paired with a proper ventilation system, can greatly improve your home’s efficiency year round. In the summer, proper ventilation will help move that stifling hot air out of the attic while your insulation works to keep it from coming into your living space. In the winter, the ventilation removes moisture while the insulation keeps your home warm and cozy. Take a peak in your attic. If you notice woodchip or newspaper-like insulation, it is time for an upgrade. Upgraded insulation can be blown over your old insulation and will start paying for itself in energy savings.

Remember, it costs less to maintain things around your home than it does to repair or replace things! Investing some time in preventative home maintenance this spring will keep your home efficient and looking great.


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