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

Turnkey Real Estate Investing – Offering Capital and Revenue Gains Simultaneously

Turnkey real estate investing is a candid investment idea that offers capital and revenue gains to the investors.The turnkey properties are the assets that are purchased with investment purpose. As a matter of fact, turnkey properties are the ones that produces high return along with being safe and secured.

turnkey-investment-property

With the passage of time, real estate investments are gaining popularity among the investors worldwide. It is because investment in real estate has less volatility as compared to other forms of investment with relatively higher chances of appreciation. Thus, investors feel that their investment would be safe and while disposing the property, they would gain substantial profits as compared to the investment they put in acquiring the asset.

What is a Turnkey Property?

Turnkey properties are the assets procured with complete investment planning. The perspectives of the turnkey real estate investing is completely different to the cases wherein the buyers are buying the property for their personal usage.

These properties are either rented out to the tenants or the owner sells off the assets once the valuation of the property goes over the investment he made to procure the property. The buyers (investors) usually rent out the property for the time he or she would hold and then the asset gets disposed off.

The turnkey property is rented out to a qualified tenant. These tenants are properly screened by using our tenant screening process. Therefore, we offer maintenance free guarantee and a rental protection plan, which guarantees rent for at least 1 year.

Features of the Turnkey Properties

  • The property is taken through series of alterations and renovations, so that it demands the least of maintenance expenses. This means that your tenants would be happy and would continue with the tenancy agreement for longer stretches. Aside, your expenses for the maintenance being lesser, you would save major part of the cash that inflow per month.
  • The real estate developers usually commit occupancy of tenants for at least a stretch of one year. Thus, the investor going for turnkey real estate investing gets a chance to earn perpetual revenues for this span, before he/she disposes off the assets.
  • The investors are offered with comprehensive services on property management that relieves them from the worries of supervising the property and handling its timely repair & maintenance.
  • The investors are served with Hotline numbers that keeps functioning 24×7 to support the needs of the property owner.

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

Real Estate Investing Basics Many Investors Forget

c1

There are really only a handful of building blocks that form the foundation for success in real estate investing. That being said, young or old, grizzled trooper or newbie, it’s surprising how many investors are unfamiliar with these essential building blocks. In fact, even if you’re a seasoned veteran of the real estate battles you may be unfamiliar with these key stepping stones to a successful business.

Although this is not a complete list, following are a couple of basics for building a thriving real estate investment business.

  • Optimizing the Process
  • Private Lenders
  • The Right Attitude
  • Optimizing the Process

If you’re an experienced real estate pro, or even if you’re new to the game, you probably know some of the essential techniques for running a successful real estate investment business. However, optimizing the process means accelerating and implementing what you already know. Optimization is re-thinking, re-hearing and re-learning the same thing over and over and over again. It’s not about the next new shinny thing. Truth is, you can become darn near a genius at something by doing it over and over again.

For example, to become a master at karate your instructor doesn’t teach you a thousand moves to use one time. They teach you one move to practice a thousand times. The same principle applies here. When you optimize the process you’re simply learning to do exactly the same thing thousands of times.

Over and over and over.

Fix and Flip

Let’s say you’ve decided to focus your efforts on buying, rehabbing and flipping houses. If that’s the case, there are a small number of steps you should take to insure and maximize your success. There are not a thousand steps that change every time you flip a house. There are a handful of steps that remain the same for a thousand flips.

Following is a quick overview of some of the major steps you would follow in flipping a house. This is certainly not everything you need to know by any stretch, but it highlights some of the important points.

Find a hot property

You should talk with people who can show you the techniques the pros use to find hot properties to flip. They may be realtors or they may be professional real estate coaches that will teach you, for a fee, the best ways to find hot properties.

For example, you should talk to wholesalers because they usually have a solid supply of good houses to buy and flip. In addition, you need to decide on a specific geographic area for establishing your business.

Get the Funding

You will need to have funding in place before you can move ahead very far with flipping a house. If you don’t have funding, how are you going to buy the house? You should have a system in place for funding your deals. Typical funding resources include the following:

  • Private lenders
  • Banks
  • Credit Unions and other Institutional Lenders

Work with a Reliable Rehab Contractor

You should establish a relationship with a trusted contractor. Remember, your job is not to rehab the property yourself. Your time is too valuable to spend it painting walls and tearing up flooring. Your job is to find hot deals, not fix the plumbing. You should form a relationship with a contractor that is dependable and trustworthy. The contractor you select will be a critical part of your business.

Work with a Trustworthy Title Company

It is essential you establish a relationship with a title company that is reliable and trustworthy, just like your contractor. And like your contractor, your title company will form an essential part of your business.

Private Lenders

You will need to learn how to establish relationships with private lenders. These are people who are willing to fund your deals with their money, and they are a much better alternative than banks and other institutional lenders for real estate investment deals. Essentially, you create your own personal bank buy establishing professional relationships with private lenders. They lend you the funds for your deal, and in return you provide them with a higher interest rate on their funds, and sometimes even a piece of the profits from the deal. This is not pie-in-the-sky; there really are wealthy people out there who will lend money to you if your deal is solid.

You need to know how best to establish relationships with private lenders. Not only that, but you also need to understand the law. There are strict laws in place for how and when you can approach private lenders.

Once again, this is an instance when having a relationship with a professional real estate investor who has the skills to provide mentoring or paid coaching can be a career-saver.

The Right Attitude

Everybody wants a magic bullet. But life is not about magic bullets. It’s not about the one thing that’s going to make you rich. It’s not about the one move in the stock market that’s going to go up or down and make you rich or poor. It’s about the long-term optimization, and the long-term execution of a business model that works. For example, flipping houses works, if you know what you’re doing. The secret is all about learning and executing, and learning and executing. Over and over. It’s not just about learning. It’s easy to learn, but

sometimes it’s scary to execute.

Live Up to Your Abilities

It is disappointing to see talented people who are living below their talent level, who are not trying things and executing things and daring to go out and make things happen. Most people have the smarts and inherent talents to become successful real estate investors. You simply have to go out and make it happen – just go out and do it.

It’s Okay to Fail – Just Keep Trying

Sometimes that means failing. Trying some things and having them not work. But you should get out there and make a lot of offers. You should have a mentor or professional coach in place to help. That way, if you have a deal and want to get their feedback before you proceed, you should be able to submit it to your coach for their feedback. They should be able to look at that deal and tell you if it’s a good deal or not. And then they should coach you through it.

The Bottom Line

You can be successful in real estate. It’s not brain surgery. But you must dedicate yourself and do the homework so you understand the basics. Then you must optimize what you’ve learned. You need to know what you want and you have to go make offers and take action. The success you deserve is sure to follow.

aboutdcDerrick is a Memphis native 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 Purchase Turnkey Rental Properties

Untitled-3In relation to the economy and the uncertainty of where the financial markets are heading, corporate bailouts, bank bailouts, insurance company bailouts and the overall picture of real estate uncertainty poses one of the greatest times to secure income based properties. This downturn in the economy is not something that we (those of us who have experienced the 60’s and the late 70’s & 80’s) have not seen before in varying degrees but not altogether very different than today’s economy. By that, I mean the down turn in terms, of interest rates either up or down, double digit unemployment, banking & S&L failures, foreclosures – large inventories of real estate residential and commercial and tight credit.

Is the picture taking shape, yet? If you will go back and do your research on foreclosures and real estate in general for the downturn in the economy and then compare real estate in the various categories; residential, commercial and multi-family you will discover which had real value. Well, since you want me to tell you I will, it is income based properties. The rate of return on a property has and will always drive the value. The key is what parameters do I use to determine what type of property to purchase. The property that offers solid contracts for 1 year or longer, evaluate the rental clientele (less likely to vacate), location, condition of property (new or rehabbed) and if you are an absentee owner check the reliability of the management company are all keys, plus many others to consider when investing in rental income property. I will give you a hint on the asset base of some of the richest individuals in the world, it is real estate properties with an income base.

Investing in rental income property is wise for the short and long term. Those values are based on the stability of the income received. Property should be, today, well below values of last year and should cash flow at the lowest level of rent available for the area. Special rental circumstances offer better rates and those are the ones you need to search out and evaluate. Tax incentives for buying properties and higher depreciation, if available, are advantages to you the investor. Take advantage of any government programs to assist in paying for the property and, also, in renting the property. Who has more money than our government and why not get some of your tax money back, it spends, at least, for now.

Hopefully you will do your homework and find proof positive that income property will hold its value when purchased for the right price with a net ROI of 20% or greater. Make no mistake that there are inflated properties out there with a rental rate that will not hold up as the employment rate increases. They offer incentives to purchase which is the first sign for the buyer to beware, then check out all the surrounding property and rental rates. Rental property can be owned and managed by you with you doing all the work or having a turnkey situation with a management company in place. How valuable is your time and what is it worth for someone else to deal with the problems has to be the obvious question that you the investor must answer.

With the current real estate foreclosure, REO bank properties, short sales and other depressed real estate properties, you the investor can take advantage of the best of both worlds. Low real estate prices from several sources and cheaper rehab pricing can produce a win-win situation for you the investor. Capitalize on the market conditions of today and start making money to secure your future with higher rents and appreciation in value in the upturn. Financing these properties can increase the volume of properties and income which is a smart move with the low interest rates. Financing is a different horse of a different color and will require more time and space which leaves the door open for a future topic.

aboutdcDerrick is a Memphis native 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