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what is the best way to buy rental properties

  • February 10 2013 - Ames
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Answers (6)

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With the internet you can find all the answers you need. It is still location location .I look for 10% return on my rental .This means take your time buy only based on math no emotions .You must buy at wholesale prices or you start in the hole right from the start.

 Check out repos are they really that bad shape, this part needs home work .1=foundation if it looks anywhere near bad have it checked out.2=Roof 3=all major mechanical electrical, plumbing this includes check out the sewer from the  house to the street run a camera down it about cost $200 give or take depends where you live

  • January 04
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All good advice.  I agree, simply comes down to the numbers. I would add though: Find high demand areas with steady history of rental demand, but don't compromise on the 'math'.  Cap rate, ROIC, return on equity, etc.  





For a good way to figure the numbers, check out [Promotion removed by Zillow moderator. Please see our Good Neighbor Policy for more information.]

  • May 20 2013
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Today with buyers market and rent prices actualy have not changed, you need good realtor who willl provide you with target area analysis info. And I absolutely agree with Amy Cimetta all about mathematics.
  • February 10 2013
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Buying rental properties is all about the numbers. It's a calculated decision rather than an emotional one. You are not going to live in this home so you don't have to love it, but you have to love the bottom line. 

Your goal with a rental property is positive cash flow and/or appreciation in value. It's important to determine which one (or both) you want because it will determine if you will be able to achieve them with a particular property. For instance, you may be purchasing a property for it's future appreciation and therefore you are willing to lose money on a monthly basis in exchange for future profits.
 
In the simplest terms, you need to analyze your income and expenses. Do you have to put in an initial capital investment for renovations? Don't forget to account for vacancies. When buying a rental, the seller should give you the rent rolls, and information on monthly expenses, etc. You will need to analyze the sales price, interest rate of your loan, taxes, future appreciations of rents, costs to run the property, the list goes on.

There are certain numbers that are used that will help you evaluate the rate of return on a property and compare one from the other. There is the Cap Rate. This is the Net Operating Income/Value (Sales Price). There is also the Gross Rent Multiplier (GRM) which is the Market Value (Sales Price)/Gross Annual Income. This is just the tip of the iceberg. I highly recommend you do some research and get familiar with what to look for in an investment property. A great book is "What Every Real Estate Investor Needs to Know About Cash Flow...And 36 Other Key Financial Measures" by Frank Gallinelli, You can find it here: http://www.realdata.com/gallinelli.shtml

Good Luck!
  • February 10 2013
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Know what you are getting into before you get into it or youll be quished like a little bug, or worse.

  • February 10 2013
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Find a realtor that is familiar with homes and rentals in your area. A realtor will be able to show you what rental rates are in various neighborhoods. Then you can decide on which area you prefer along with a price range that is comfortable for you. A realtor usually can connect you to a mortgage broker, if you should require financing. Lastly, a realtor will have all the necessary rental forms and contracts you will need in the future.
  • February 10 2013
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