Real Estate Investing
A Rental Money Machine
Build One Of Your Own
If you are looking for a steady, income-producing investment that isn't dependent on the ups and downs of the stock market, rental property is just the investment you're looking for!
There are lots of ways to go about Real Estate, you can do Fixer Uppers, Forclosure or R.E.O. property,Turn key rentals,Short term rentals long term rentals, Model lease back, the list can keep going on and on. Each one comes with experence and how aggressive you want to be. As lucrative as owning rental property can be, the wrong property can be a bottomless money pit. You need to know how to go about locating property, finding tenants, managing the rental, and how to make your investment profitable or working with somebody that does it full time as there occupation, that is one sure thing working with me is I do this, I own income producing property, I can keep you out of the pit falls and learn as you go. Many first-time landlords learn lessons the hard way. They end up spending thousands of dollars on repairs, chasing after tenants for rents, and are constantly being called up in the middle of the night to take care of minor repairs such as burned out light bulbs. For some investors, it may be as simple as starting to treat their rentals as a business and let somebody help them through the process.
The right way
Start fresh from the beginning. Utilize a return-on-investment (ROI) formula in order to determine what you need to charge for rent in order to have a positive ROI. If the market in your area cannot bear the amount of rental income needed, you may want to consider selling that property or move on to another property in a different section of town. That is the best part of Real-Estate in the Valley of the Sun each section of city has a little different clientele and the amount of rent you can charge is different.
Locate properties effectively
Every single residential property is a potential investment winner and no property should be discounted without consideration. Hone your search by spotting the "dynamic" properties among the "duds." even the duds might be good.
Strategy: Look for properties in local neighborhoods or by zip codes where home prices are stable and appreciating.
Stable and appreciating neighborhoods ensure the preservation of your investment and can provide additional return-on-investment through appreciation of your property.
Strategy: Look specifically at middle to low end of the price range in neighborhoods.
It is there that you will find more room for appreciation of property values.
Do the math before you buy
Once you have zeroed in on a prospective rental property, you should have 5 or so, run your numbers through the following return-on-investment (ROI) formulas to determine whether to make a purchase offer or to move on to the next property.
Rental Property Formulas
ROI Formula for Rental Properties Return on Investment (ROI)
7) Cash Invested $__________
(A) Income: ROI (Net Income ÷ Cash Invested)
Annual Rents (A) $__________ (C divided by #7) $__________
Total ROI Including Projected Appreciation
(B) Expenses: 8) Purchase Price of Property $__________
2) Property Tax $__________ 9) Estimated 12-Month Percentage Property Value Increase %__________
3) Insurance +$__________ 10) Projected One-Year Gain in Price (#8 multiplied by #9) $__________
4) Maintenance/Mgmt Fees +$__________ 11) Projected Total Return for the Year (C + #10) $__________
5) Repairs/Vacancies (10% of Rents) +$__________
6) Mortgage Payment (PI) +$__________ Total ROI
(B) $__________ (Total Return ÷ Cash Invested (#11 divided by #7) =__________%
(C) Net Income/Cash Flow:
(A - B = C) (C) $__________
A powerful example of ROI
Assume you acquired a rental (purchase price of $100,000) with $10,000 of your own money down. A 10% ROI mean you would net at least $1,000 annually after expenses. If your property appreciates just 3% annually, your $1,000 net grows to $4,000 net / equity ($100,000 @ 3% = $3,000 + $1,000 = $4,000), a total ROI of $40%!
Don't forget the tenants!
Just because you have found property that meets your ROI requirements does not mean that you can sit back and cash your rent checks just yet. It is imperative that you properly screen your tenants and sign them to a lease that mutually protects your investment as well as your tenants.
Do your homework
By doing your homework prior to renting your property, you will save yourself the hassle and expense of correcting the consequences of improper planning and preparation after your property is rented. Just remember that Real-Estate is not rocket science but there are allot of people that lose $$$ in this business, most are the ones that have there own ways, it is the best business to leverage yourself for investing, but it is always best to work with a team of people or a mastermind group to make you money. Following these simple strategies will give you the tools to make your dream of building a well oiled money machine a reality!
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