How to Find the Rental Properties
If you’re looking for a way to get your feet wet in a real estate investment career, owning rental property may be the perfect trade for you. As owners of real estate property for over a decade, there are a few things we’ve learned and we’d like to share them with you. Today’s blog focuses on finding the right rental properties, and how to know when you’ve found a good deal.
The strategies we’ve gone over throughout the previous manuals include the following:
- Courthouse auction
- Other distressed seller situations (maybe sourced from bandit sign campaigns, etc)
- Refer to finding manual
- Wholesalers in area
- Realtor relationships
- ‘Tired’ landlords
- Banks, banks and more banks!
There are two types of rentals:
1) Cash flow. This can be defined as a minimum of $300 per month left over after principal, interest, taxes and insurance (PITI) and maintenance are paid. The typical maintenance cost factor is 20%.
2) Appreciation. This type of rental covers its costs and realizes a good rate of appreciation.
When to know you’ve found a Good Deal
Although we have reviewed in previous manuals the art to finding a good deal, I just wanted to go over a few of the key points to look at when evaluating. As we mentioned back in manual 2 of the series for finding, buying a property right can make the difference between success and failure. When you find the right opportunity for a real estate investment then you can create a great deal. Hopefully you are on the path of becoming a great deal finder and if you are able to find a good deal then it may be worth employing a buy and hold strategy to gain monthly income and equity in the property.
- Positive cash flow
- Forced equity
- Capital gains
- Equity capture
- Loan buy down
- Wealth building
Buy with a rental with a formula in mind, just as you would if you were purchasing a rehab. This creates forced equity; allow me to provide an example. Say you have an ARV of $70,000 and the MAO was $34,000 plus an addition of $15,000 in repairs. So if you buy, renovate and put a tenant in then you get forced equity.