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Real Estate Investment Newsletter
Choosing Your First Rental Property
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How to Pick a Winner
When trying to select the right property to buy, it's important to consider the following five criteria:
1. Location - You have probably heard the old adage about the three most important elements in real estate being, "location, location, location!"
The best area to invest in is usually your own hometown. You know the town's history and growth patterns. That's a big advantage in selecting a good neighborhood for your investment.
It's also easier and more convenient to manage a property located near your home. Whenever your personal attention is required, you are just minutes away from your property, saving time and travel.
2. Price Range - Remember, your gross multiplier rule of thumb.
Gross Multiplier = Sales Price / Gross Yearly Income
3. Economics - The key to owning a successful rental property is to structure the purchase so you get a genuine, pretax cash-on-cash return. To do that, you should plan to make a down payment depending on the purchase price.
Don't expect to buy a good rental property with much-publicized "no-money-down" techniques. These are high-risk strategies that usually create large negative cash flows. That means the expenses exceed the income.
In order to structure a transaction that is economically-sound, you need to make a realistic analysis of your projected income and expenses. You want to be certain your projected rental income will pay your mortgage, taxes, and operating expenses, and will give you a reasonable return on the capital you invested. Your real estate broker can help you make an analysis like this and will provide you with rental rates for comparable properties and current mortgage information.
4. Type of Property - Each property type has its own pros and cons. Read our past newsletter to determine which property type is best suited for you. Click here.
5. Cashing in your Chips - Timing the sale of your property will depend on your investment goals. Generally, you should plan to own your property for three to five years.
If you have an investment for a specific purpose, like paying your child's tuition, you will want to sell your property after it has appreciated substantially and cash in on your profit. If your goal is continued financial growth, you will want to hold on to your property until you find another suitable investment. |
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Want to Learn More About Investing in Real Estate?
Upcoming Classes
Making Money in Real Estate
3 Tuesdays, 6-9 P.M.
New Series Starting January 31, 2017
Clovis Adult School
Downtown Investment Series (DIS)
Free monthly classes!
Classes starting in February., 2017
Bitwise Industries South Stadium
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Thank you for reading!
Stumpf and Company
Real Estate
Office: (559) 222-3058
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Ron Stumpf, Broker
BRE Lic. #00533442
Alex Stumpf, Broker
BRE Lic. #01877984
V
eronica Stumpf, Broker
BRE Lic. #01906952
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