January 04, 2012

2012 is the Year to Invest in Income Property!

2012 is the year to think about purchasing investment rental property!  Low home prices combined with low interest rates make this the best time in years to become a real-estate investor. Successful investors are still buying properties because real estate has tendency to appreciate in value.

Purchasing investment property is probably one of the best things you can do in today’s economy. Everyone needs a place to stay, but with so many people struggling to make ends meet, many of them have turned away from home ownership and are instead choosing to rent. In addition to homeowners who are unable to keep up their monthly mortgage payments, there are people who have poor credit history and will not be able to purchase a home. These people all make ideal candidates for tenants and their monthly rental payments will provide a nice stream of passive income for the savvy investor.

The important thing to keep in mind is that you need to be able to purchase properties that will provide a positive cash flow. This means, you need find property that is priced well and will provide a great opportunity to create the income you desire. Contacting Greg Rapp at 704.213.6846 to find Salisbury~Rowan County investment opportunities is your first step toward creating an income opportunity for you!
 
There are many benefits to the strategy of purchasing investment (rental) properties, including:
  • Rental Income
  • Cashflow Appreciation (Property in the U.S. has appreciated an average of 6% every year - for the last 80+ years!)
  • Several Deductions - Including:
    • Interest
    • All The Expenses Related To Each Property
    • Depreciation (Depreciation means that the government lets you pay less on your taxes each year - when in reality, properties typically appreciate in the market.)
The real-estate market is slowly starting to recover.  Home prices have not been this low in many years, and interest rates are especially low. With money cheap to borrow and houses cheap to buy, now is absolutely the best time to invest.

1118 Fries Street, Salisbury NC ~ $48,500

An example of a cute property that is available RIGHT NOW that is positioned as a PERFECT investment opportunity is the Arts & Crafts Bungalow in the desirable Fulton Heights Neighborhood of Salisbury NC. With 1300 square feet, this 2-bedroom home with spacious front porch, French doors, 2 fireplaces, and walk-out cellar is ONLY $48,500!  You may logically expect $500/per month in rental income or more!

While the timing may be right, these five tips can help first-time investors take advantage of what might be the opportunity of a lifetime:

Understand your options: Since not all investment properties are the same, it is important to determine what type of property fits your strategy.  Are you prepared to become a landlord, or would you rather restore and resell properties? First-time real-estate investors should start with residential housing, since commercial real estate and land development still face challenging market conditions.

Partner with professionals: First-time investors should find a real-estate agent experienced in investment property deals who can help you locate promising properties. Look for brokers who develop relationships and expect to do business with you in the future and therefore will be much more careful with what they recommend.  A second option may be to collaborate with an experienced real-estate investor and close a deal together. In this economy, an experienced real-estate investor may be willing to work with you in exchange for the capital you can provide, giving you the opportunity to glean investment knowledge and experience firsthand.

Even if you do not collaborate with other real-estate investors, it is often a good idea to talk to them about pitfalls they may have experienced.  You might find going down to the general district court in the area interesting when you listen to some landlord/tenant cases. You will get a sense of the challenges landlords face.

Location~location~location: If you purchase a property with hopes of renting it out, location is key. Homes in high-rent or highly populated areas are ideal. Rural areas where there are fewer people and a small pool of potential renters may not be as wise an investment.  You will want to look for homes with in neighborhoods that have a low crime rate.  Also, think about potential selling points for the property. If it has multiple bedrooms and bathrooms, is near public transportation, shopping malls or other amenities, it will attract renters, as well as potential buyers if you decide to sell later. The more you have to offer, the more likely you are to please potential renters.

Capital savings: Speak to potential lenders about whether you have enough assets to handle the variables that come with investment property. Even if you plan to rent out the property, count on paying the mortgage whenever there is a vacancy. You may wish to try to stash away roughly six months of mortgage payments in case there is a need, and you can additionally use that extra money for any necessary repairs.  Be aware that if you are planning to renovate a home for resale, you may end up holding onto it for several months in the current market.

NOTE:  Expect to be able to ask 10% of the purchase price for monthly rental fee.  It will be up to you whether to let your tenant cover other expenses such as utilities, lawn care, and other maintenance.  Be sure your rental contract thoroughly explains these items!

Support systems:  You will not want to wait until a rental property needs repairs to find qualified repair professionals and contractors.  It would be wise to have a ready list of individuals or companies who can take care of the different challenges that occur so you can simply make a call when issues comes up. You will want to establish a good relationship with an attorney to consult regarding tenant issues. Perhaps you will want a property management firm to handle the day-to-day rental affairs if you are busy with your own career and projects. An accountant who understands the tax ramifications of investing is a very helpful partner. The more support you have, the better you will be able to handle the problems that come your way.

Buying investment property is an entirely different experience than buying a primary residence. When you buy your own home, you invest emotion in it as well as your capital.  When you buy an investment property, emotions need to take a back seat and you must ask yourself what make the best sense.

Some helpful steps in considering rental investment property:
Find a maintained home, or plan to fix!
  • Read newspaper classifieds to determine which types of properties seem to be most popular, and how much they are renting for during all seasons.
  • If the area attracts senior citizens, one-level living may be the best choice.  In a case like this, you will want to avoid homes where renters must climb a flight of stairs to reach the entrance.
  • Read real estate magazines for terms highlighted by REALTORS®.  If agents continually mention an item, it may be in demand. Try to find a property with one or more of those features.
  • Look for a property within a reasonable distance of shopping and area attractions.
  • Find a well maintained home, or plan to do an immediate fix-up. A shabby appearance will not attract renters, and will lower the potential rental income.
  • Before buying a home in a development, make sure the restrictive covenants allow rentals.
  • Get a quote for homeowner's insurance, telling the agent you plan to rent the home. Ask if the agent has any special recommendations for landlords.
  • Talk with an accountant to verify that the income you can realistically expect to receive is appropriate for the home's purchase price and projected maintenance fees.
Hiring a Property Management Company to Rent Out Your House
Here are the types of things a prospective landlord should find out about a tenant before renting out your investment property:
  • Past and Present Employers
  • Former Landlords
  • Present Income and Monthly Debt Obligations
  • Credit Scores
  • Number of Occupants (subject to the Fair Housing Amendments Act of 1988)
  • Types of Pets
  • Police Report
  • Personal References
If this information is too time consuming to gather or too difficult to obtain and verify, you may want to contract with a professional management company. Management companies can charge 8% to 10% of the monthly rent, but they will do all the work on your behalf and are knowledgeable about state and federal laws, such as the Fair Housing Act. In addition, there might be county ordinances to adhere to and city fees to pay. A local real estate agent, such as Greg Rapp (grapp@wallacerealty.com) can be a good source to get recommendations for property management companies.

Here are things most property management companies will do for a homeowner:
  • Advertise the house for rent
  • Screen potential tenants
  • Collect rent and security deposits
  • Negotiate rental agreements and sign leases
  • Conduct periodic property inspections
  • Handle repair issues
  • File evictions, if necessary
Above all, consult with a professional real estate agent to help you with your investment purchase.  Greg Rapp is NOT just your average "neighborhood real-estate agent"!  He knows from experience as a licensed agent how to find, buy, rent, and manage income-properties.

Depend on Greg to walk you through this same process, step-by-step, so that you can own your very own cash-flowing investment property!

It does not matter where in the U.S. you live. Right now there are thousands of investment opportunities to choose from to invest in throughout the country.  Some will produce positive cash flow, while others are strong long-term investments that may best fit with your particular financial goals.

Greg Rapp’s job is helping regular people ~ just like YOU ~ to successfully find, purchase, and maintain high quality, "wealth-building" investment properties. Contact Greg at 704.213.6846 and let him work with you to make sure that your new investment makes sense for you, especially now ~ when low home prices combined with low interest rates make this the best time in years to become a real-estate investor!

If you have ever thought about how nice it would be to have a lucrative form of income, you might want to look into what investing in today's low cost homes can provide. With very little trouble, you can create a portfolio of one or more properties that will provide you with a nice source of investment income for many years to come.