This is a guest post by Agnes Jimenez, a fellow blogger and SEO guru on Investment Properties. If interested in submitting a guest post please read our guest posting policy and then contact us.
Many people are concerned about the current state of their finances. Even individuals who have a job and are still bringing in a decent income have cause to worry, especially given the fact that so many people who were in a similar situation are now suffering because of a lack of financial stability. One way to ensure long-term income in these difficult economic times is to choose quality investment properties.
Are all investment properties lucrative?
Of course, choosing the right investment property takes a willingness to do some research; not every property is a potentially lucrative investment. Some factors that you will want to consider are the current rental prices for the area. Even if you purchase a home that you renovate to reflect the highest standards for the area, there is still going to be a ceiling in the amount of rent that a particular area will bear. The bottom line is that it all comes down to cash flow. Let me take you through the math so this makes more sense:
Break it down for me:
Let’s assume you are looking at buying a 2,300 square ft home as a rental, and the cost is $175,000. Does this make sense and will it be a good investment property? To answer that, again lets calculate the cash flow generated/required for this specific property.
- Payment (assuming 1% property taxes; .5% PMI, 3.75% interest rate, $0 down payment) = $956.29
So, if the rent you can bring in each month is greater than this $956.29, you are technically cash flow positive (you do need to keep a reserve amount for repairs, unrented time, etc.).
Work with an agent
When looking for investment properties it is extremely helpful to work closely with an experienced professional real estate agent. This agent will be able not only to notify you as soon as a new property comes on the market, but they will also be able to provide essential property comparisons. By reviewing similar properties in the neighborhood and researching rental prices, you will soon discover the threshold that similar rental units will bring in that area. Fortunately, today’s real estate experts can provide the experience and expertise needed to help you in your search for the right investment property.
While many people have stayed away from the real estate market in the past several years, recent trends show that the housing market is beginning to recover and is now showing signs of growth. This is an excellent time to get into an investment property and take advantage of low prices that are on the verge of increasing in value.
When considering rental properties as an investment, jensenandcompany.com suggests that it is important to consider the property from the perspective of the potential tenant. For example, if you purchase income property in a college town, close proximity to public transportation might be important. Likewise, if you are purchasing a rental property in the suburbs, chances are you will want a home that is close to quality schools and community amenities – these types of ‘extras’ can easily add 10-15% of value to the property and make it much easier to rent out.
An investment property can be an excellent way to add a long-term income stream to your portfolio of investments. Everyone needs a decent place to live, regardless of the economy. Decent and affordable housing will always be desirable.
Agnes Jimenez is a professional blogger and writer. She writes for many online establishments that deal with real estate and personal finance. She’s currently guest blogging in behalf of Jensen and Company, a real estate establishment in Park City, Utah.
We’d love to take further advantage of current rates and buy a place to use as a rental, but it’s just not feasible for us right now. I think if it’s right for you, it can be a great way to provide long term income.
Good thought John. I think investment properties are a great long-term place to investment b/c it’s a fixed commodity. But it is high-risk as it’s such a huge expenditure and you don’t know if, in the immediate future, you’ll end up upside down or without renters.
This is awesome, dude, thanks! When our mortgage is paid off, my wife and I are planning to buy some rental property and we can use all the info we can get. Since I’m a “fix-it” dude, it’ll be nice to not have to pay outside contractors to fix problems in the place. I can do it for free and do it right!
Good stuff! My dad is extremely handy with his hands. He saves my mom and himself tons of money doing his own electrical, plumbing, installation, flooring, everything really. And he’s always satisfied with his own work. I’m sure you are too.
In fact, you should write about that!
I’m right with John on this one; I want to own investment properties in a bad way but it’s just not in the cards at this moment. I have to finish off those student loans first!!
Yep I can appreciate that. I repeat something I heard once, and don’t remember where:
“If you want to make a million dollars, you need 100,000.”
It may take some time, but increasing your capital will happen if you continue to work hard at it.
My wife and I have been purchasing fixer upper houses and turning them into rental properties for over ten years. We started doing it in our spare time to provide us with a little more economic security.
We have certain “target” areas where we really like to buy fixer-uppers. These are usually in places of town where there are a mixture of regular houses, rental houses, and other types of properties.
We find that you can purchase properties at a lower price in these areas, and there is usually high demand for rental housing there as well.
What was the key for you to have the starting capital to do this? That for me is the leap. I have the desire. And I’m sure I can build the know-how. But it’s the large first financial dive that I don’t have the capital for yet.