Obj: Rather you’re buying to flip or buying to hold, here’s the must knows for acquiring properties.
1. Location, Location, Location- 9 times out of 10 you will be investing in areas that you’re familiar with. If not, you should be able to work with a realtor in the area or someone who does know it. Make sure the area is already booming or up and coming for best results.
2. ROI- while there is no set standard for ROI but you want the best return on your investment as possible. For most investors, there’s a 1% rule where your net income should be 1% of your total acquisition cost cost. For example; if you’re looking at a house that is cash flowing $600 after insurance, property management, etc... you’re looking to buy it for $60K or less. There’s a few markets who offer those returns or better, Cleveland and Memphis being 2 I know for sure.
3. If you’re looking to flip properties, I will tell you now that the hardest part of it will be finding a reliable contractor. Only work with people you trust. You should also work with programs like Bigger Pockets that will provide reports for any property you’re looking at at whatever price point you enter. Wholesaling helps a lot with knowing repair estimates and about how much you should be paying for a property in a particular area.
4. When it comes to renting a house out, if you’re not managing it yourself make sure you check the reviews for reputable property management companies in the area. You will also need to know renter laws in the area and where to get decent homeowner insurance. Require your tenants to have renters insurance as well.
5. If flipping, it is best to have a realtor list it for you for a flat fee or you can list it for sale by owner on sites like Zillow, Trulia, Redfin, etc... there’s also a site called rootstock where you can sell your turnkey properties as well.
6. Different ways of acquiring properties. Of course you know about all cash buys, FHA loans, and hard money
lending but have you ever heard of “subject to”? That’s where you basically take over the mortgage of someone’s home. Good for you because it’s usually a smaller payout than buying cash, YOU don’t have to qualify for a loan, have your credit ran, or anything that comes with doing a conventional loan. People use this to acquire cash flowing properties by buying out the seller, renting out the house, and using part of the rent to cover the mortgage and the rest is cash flow.
7. Another method is short sale. That’s where you get houses that are in preforeclosure. Usually have to work with a realtor to negotiate with the bank and there’s a long drawn out process but you can end up getting houses for 20-30% what they’re worth when done at the top level. Mostly around 50-60% tho.
Over the next few weeks, I will elaborate more on these various techniques to help you in your journey to acquiring your next property.