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The Part Time Real Estate Investor

By: Real Estate Market Analysis

In this article, I’m going to focus on how you can acquire a single loved ones home (SFR) as a long term rental investment. So let’s start.

SFRs make excellent investments for long term rentals. Many households use SFRs to reside in before they buy their own home. SFR renters are typically households that require some stability in their living situation (unlike apartment dwellers who are usually younger, unmarried and very mobile). I invest in both SFRs and apartments but I’ll focus on SFRs for now.

How you can evaluate the purchase of a SFR:

1) Know the neighborhood. Are the houses right here in a decent region? Has the neighborhood declined within the most current years? What kinds of homes are right here? What are the typical rents within the region? Are they block houses or are they wood framed? How numerous bedrooms do these houses typically have? Do the residents here take care of their houses? What sorts of cars do they drive? Are these homes in between 40-80K, 81K-125K,126K-160K and so on? Will be the neighborhood close to major businesses, the highway, public transportation, shopping, entertainment? You will find literally dozens of questions you should ask yourself about these neighborhoods. The point would be to find a few neighborhoods you like and stick to investing within the areas you realize like the back of one's hand.

2) You do not need a fancy home to rent. Most SFR rentals are sturdy, not extremely fancy, low maintenance houses in middle class, blue collar and white collar neighborhoods. These are my favorites. There is an endless provide of target houses right here which are generally priced correct where I like them.

3) Function together with your real estate agents to bring you houses that fit your criteria. I personally like to buy rent prepared houses so I don’t need to become a project manager (remember, we function full time). My agents know not to send me something that requirements significant repairs. The much less, the better. I let them do most of looking so when they do send me something, I know it’s probably a great target for acquisition.

4) 3bd/2bth homes are the best. Three bedroom/ two bath homes are ideal for SFR investments but I occasionally make exceptions. I personal plenty of 3/1s also but it’s mainly because of the reality that the neighborhood much more commonly has 3/1s than 3/2s. I would urge you not to invest in 1 or two bedroom homes. They're difficult to rent and extremely difficult to sell later on.

5) OK, so you discovered your 1st target. You have it below contract and now have it inspected. Look over that inspection carefully! Will be the roof going to last for another 15 years, 10 years, or 1 year? Will be the A/C old or is it going to hopefully final another 5-10 years. Why is this important? Simply because you don’t wish to buy a SFR that's going to have a large number of dollars in repairs to become made quickly following you purchase it. If the inspection report comes back with substantial issues, you are able to renegotiate a “maintenance rebate or upkeep escrow” from the seller. This is money held in escrow for you to invest on repairs after you take possession of the property. Do not ask for a lower purchase price. This won’t help you spend for the repairs when they occur!

6) Calculating a great deal. What sort of return are you expecting following all of the bills are paid? You are largest bill will likely be the mortgage right? Have you calculated what the mortgage payment, insurance coverage and taxes will be? I always have the mortgage broker combine the payment so I never underestimate my greatest expense. If I can’t make a net profit within $100 of my mortgage, tax and insurance coverage payment, I either negotiate a better deal or I walk away to locate a better deal. Let me explain, ie:

House cost is $72,000

Downpayment fo 20%

Estimated payment which includes mortgage, taxes and insurance is $459

SFR rents for $950

Payment to my property management business is 10% of payment or $95 per month (which I'll explain the significance of later)

Equals a net profit of $396 per month ( which is inside $100 of my total mortgage payment of $459).

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