By startingpoint July 24, 2014

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
  • REO
  • Foreclosure
  • Other distressed seller situations (maybe sourced from bandit sign campaigns, etc)
  • Refer to finding manual
  • Wholesalers in area
  • MLS
  • Realtor relationships
  • ‘Tired’ landlords
  • Banks, banks and more banks!
  • Marketing

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.

Why Rentals?

  • Positive cash flow
  • Forced equity
  • Depreciation
  • Capital gains
  • Equity capture
  • Loan buy down
  • Leverage
  • 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.

For more information about starting your rental property investment portfolio, contact Jeff at Starting Point Real Estate today. Follow Starting Point Real Estate on Twitter, Facebook, and Pinterest.