6 Red Flags With Any Rental Property Purchase


A quality rental property can completely transform your portfolio. The idea of having tenants provide you with monthly cash flow while reducing your loan balance is a very appealing thought. However, not every property makes a good rental. It is important to always do your due diligence on every prospective rental purchase you make. There are times you will come across items that are not only costly but make it difficult to find good tenants and maximize cash flow. These red flag items are often non-negotiable deal breakers and must be taken seriously. Here are six red flag items to look out for on any prospective rental property purchase.

Location. As basic as it sounds the idea of rental property ownership is to attract tenants. The best way of doing this is to own a property in an area of high demand. Getting a property at a discount may sound like a good idea, but when it is time to find a tenant you may be disappointed in the results. It is always smart sticking to growing markets in developing areas. Rural properties require a unique tenant that may not be willing to pay market price. With reduced demand you may be forced to lower your price just to avoid a vacancy. You also need to consider managing a property that is slightly off the grid. The farther your rental is from where you live or work the more potential issues that are presented.

Poor demographics. When buying a rental property you should take the same mentality as if you plan on living there. If there is something unappealing to you, tenants will find it unappealing as well. With any purchase you should always look at the demographics of the area. Things you may not think matter too much to tenants such as schools, crime, unemployment and even taxes can sway a tenant away from your property. If the area is in decline tenants will go to where jobs are and where they feel comfortable living. Poor demographics often lead to poor rental properties.

Irregular sizing. You never want your rental to be too big or too small for your market. A 2500 square foot house with all the amenities you desire can be a great house to live in, but can make for a difficult rental. Tenants don’t want to furnish such a large home if they are only going to be there for twelve months, or less. Even if they do furnish it they may not be willing to pay top dollar for rent when there are a growing number of loan programs becoming available. You want to find rentals that are average size and price for the market. It is ok for your rental to look like every other property.

Wetlands/environmental issues. Every purchase, investment or otherwise, carries some form of risk. The key is to look for properties with as minimal amount of risk as possible. A giant red flag for any property are issues associated with environmental, wetlands or flooding concerns. You can fix anything cosmetic, even structural problems can be resolved, but problems with wetlands should be a deal breaker. Not only are you forced to go back and forth with the town, but these are expensive resolutions. Additionally, you never know when another problem will pop up out of nowhere. A minor rainfall can prompt a flood and open the door for other issues you never would have anticipated.

Storage. You can have the nicest property but without ample storage tenants may look elsewhere. Regardless of the size or layout of the property closet space and excess storage opportunities are essential. Tenants need to be able to comfortably live in the property. Nobody wants to have their items compressed in one room or thrown in a small closet. You don’t need to have a walk-in closet in every room, but you should have an attic or space in the basement for tenants to put extra items. This may call for you to get creative with the rehab but whatever additions to storage you can make will impact the demand for the property.

Yard. Depending on where the property is located lack of a yard can be a real deal-breaker. Markets where properties are in close proximity to each other it is almost understood that there will not be much privacy. However, in average markets you need to look at the yard before making a purchase. Nobody wants to live in a property where the neighbors are on top of them. Every time they leave the house there is somebody on either side, watching their every move. You don’t need to have an acre of land, but you should note how close the neighbors are.

All rental properties are not created equally. In areas of high demand, it is the little things that can directly impact just how rentable your property is. The more demand for your property, the more you can charge for rent, and the higher your cash flow will be. If there is any doubt as to whether something will impact the property it is always best to err on the side of caution. If you think something may be a red flag, it usually is.

by JD Esajian

What Is Your Investing Niche?

Regardless if you close a deal a month or a handful a year it is important to have a specific investing niche. Many investors think that being a jack of all trades and investing in numerous different areas of the business is a hidden key to a strong portfolio. While this is true over time you need to plant your flag somewhere and find something that works. Without a bread and butter niche to rely on you will simply bounce around from deal to deal without any real direction. You may close a few random deals, but you won’t be able to build a sustainable business.

Your investing niche could be developing raw land or focusing solely on tax lien auctions. It can be developing large apartment buildings or sticking to single family rentals. It is not cliché to say that there is truly a niche for every type of investor. As long as you are passionate about it and are willing to become an expert you can be successful in whatever niche you follow. Here are some examples of potential investing niches.

Single family rehabs. If you are a real estate investor in 2018 there is a good chance you dabble in rehabs and flips. Without question this is currently the most popular form of investing today. As popular as it may be, it doesn’t mean it is for every investor. Not only do you need to find discounted properties, but you need to do the right work, follow a tight schedule and a strict budget. There is plenty of upside in house flipping but only if you know what you are doing. With the recent influx of competition, it is important to have a backup niche if your market has become oversaturated.

Multifamily rentals. There is an almost natural progression for rental property owners. Most start out self-managing their single-family property and over time explore the option of adding additional units. In most cases owning a three or four family property delivers a greater return on investment in relation to a single family, yet this niche remains largely untapped. Many owners are apprehensive about managing the additional units. Additional units don’t mean additional headaches. In fact, the extra units provide a layer of protection with more rents coming in. With additional rents it makes it easier to justify hiring a dedicated property manager, making your life even easier.

Tax lien auctions. The key to being a successful real estate investor is finding deals with reduced competition. This isn’t to say that tax liens are an untapped niche, but they can provide a unique opportunity. A tax lien auction is similar to a property auction in some respects but also has several unique qualities. For instance, the winner of a tax lien auction receives the tax lien, not necessarily the property. This may eventually lead to the property, but worse case is a guaranteed return. Popularity in tax liens has slowly started to spread but is still a niche with reduced competition.

Mobile homes. When most investors consider mobile home investing they think of large vehicles that can be taken on the road. In reality, investing in a mobile, or modular home, is very much like investing in a condominium. A mobile home community features some of the same perks and amenities as the average condo complex. The biggest difference is the size of the units. The reduced size also comes with a reduced price tag which can make it an ideal niche for someone looking to invest their own funds on a budget. The percentage gains for some mobile home flips rival that of single family homes in the market, but with much less competition.

Commercial buildings. A commercial building is any property with five or more units, including mixed use and retail. It can mean a pizza shop with an in-law apartment upstairs or a twenty-five-unit retail space. Commercial purchases are typically intimidating, but in many respects are the same as any other purchase. The biggest difference with commercial buildings is that they are based more rents received and formulas rather than value. All it takes is one prime commercial building to set your portfolio up for years to come.

Land. If you are looking for a blank canvas to build, raw land is what you are after. There are some definite hurdles and drawbacks investing in land, but the returns are generally worth the headache. Raw land alone is not where the value is, but rather what you do with the land. Building any type of structure takes time, money and resources but in the right location can be a legitimate home run.

By associating yourself with a niche not only will you know what to look for, but you will find yourself with more opportunities. People in your market will know that you are an expert and associate you with the niche. If there is a deal in the niche they may give you the first crack at it. Additionally, you will know which deals are an automatic pass and which to pursue, saving yourself hours of time and effort. If you are interested in a niche you should give yourself every opportunity to pursue it. Not only will you enjoy the business more, but you will see the impact on your bottom line.

by JD Esajian

Flipping Houses: The Most In Demand Home Feature

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What will be the most in demand home feature from now through the next three years?
For a variety of reasons, including changing neighborhoods and rising crime rates, there remains a soaring demand for homes that feature increased security measures.

For those flipping houses, measures taken to secure a home may serve as one of the most important aspects in promoting appeal and facilitating the sale of the property. However, the addition of a security home feature may assist those placing their property on the market and real estate agents promoting said property.

It doesn’t matter who you are selling to, or even if you are attempting to lease out rental properties, enhanced security measures can make a big difference in value.

Many real estate investors have shied away from investing in these types of home improvements in the past to keep costs down and profit margins up, but they can no longer be ignored or their importance underestimated.

So whether you are renting out apartments, sprucing up your property for a quick sale, flipping houses full time or even building spec homes; enhancing security features could prove to increase the value of the property in question.

High-end properties may even benefit from the addition of a panic room or disaster shelter.

Of course, lavish home features like these are not always a viable option for the majority of homeowners. However, that doesn’t mean you can’t make an effort to provide an increased sense of security. Any home can benefit from today’s new breed of advanced alarm systems that offer high tech remote monitoring. They are great selling features that can simultaneously boost value and provide its occupants the protection they deserve.

Even on a tighter budget; items like reinforced security doors, basic alarm systems, secure windows and flood lights on the exterior can make a big difference.

The installment of a secure home feature can facilitate the sale of property for real estate investors or even increase the appeal for a homeowners association. However, security measures are more than just fancy assets. If a tenant or homeowner has been subjected to theft or injury after requesting a specific home feature, and the renter neglected to provide the security measure, they could potentially sue the owner for damages.

Want to go all out? How about developing your own community with security as one of the main selling features?

Cool Home Additions To Bank On

What cool, yet unconventional, home additions can homeowners and real estate investors add for additional appeal to their property? Adding the right improvements can result in huge profits for any investor.

House with exposed roof layers and plans

Home additions and improvements are constantly a source of controversy in the real estate community. Green real estate investors and regular homeowners frequently and mistakenly believe that the improvement ideas they have will automatically add value to their properties. Unfortunately, while many of these upgrades may make the property look nicer and increase a perceived value, they do little to actually boost the price.

Many times, newbies put tons of cash into home additions that never produce a positive return. It takes extensive knowledge of the real estate industry and local home values to make the right improvements and generate a profit. Decks, additional bedrooms, new landscaping, and staging can all be good moves. But what creative additions are there to consider that may really be exciting and rewarding to work on?

Consider the following home additions for your project:

1. Pools

Done right, a swimming pool with great landscaping can be the selling feature that stands out and gets a home sold, regardless of what the rest looks like.

2. Relaxing spaces

Americans are more stressed out than ever and want their home to be a retreat where they can get away from it all. So what about a rooftop Zen garden, sauna or yoga studio?

3. Bigger home offices

Home offices have been pegged as one of the most important room additions today. However, with more individuals working from home and home schooling become a bigger trend, buyers want bigger home offices that are already for them to switch on and get to it.

7 Real Estate Moves To Make With Your Tax Refund

7 Real Estate Moves To Make With Your Tax Refund

It’s that time of the year again. Taxes are either something for you to look forward to or something you have been dreading all year. However, for those expecting to receive money back, make sure you put it to good use. Real estate investors, in particular, should consider using it for their company’s advantage. This can position any investor in a way that will help them take advantage of 2014House-Investment-2-211x300

Tax time is one of the biggest consumer spending times of the year. Many tighten their belts all year long in anticipation of a big refund check from the IRS. However, for most, putting a down payment on an expensive new car, buying a boat, or heading off to Disneyland isn’t the best financial move.

In the past, millions have blown their tax refund checks in a matter of days. Those that do may find themselves back in the red before their next set of bills reaches the mailbox. With that being said, what might be a better move to make with your ‘bonus’ from the Internal Revenue Service? Real estate investors should consider the following approaches:

1. Pay Down Debt

Paying down debt is a wise move for many. Cancelling out high rate car loans, pay day loans and credit cards could leave a lot more disposable income left on the table each week . Homeowners might be interested in putting down a chunk towards reducing the principal on their mortgage, liens affecting their home’s title, or even those still underwater – dedicating that cash to bring to the closing table.

2. Home Improvements

Homeowners planning to stay for the long run, those hoping to sell houses fast, and investors may benefit from home improvements. Each addition should improve the appeal of your property. Just make sure to do your homework and educate yourself on which types of improvements will not only yield positive results but deliver the maximum returns on the investment.

3. Get a Better Accountant

It might sound weird, but for those that didn’t get as much as they hoped for back from the tax man this year, perhaps investing in a better accountant for tax planning and filing for next year could deliver some of the best returns.

4. Fund Your IRA

If you don’t have an IRA, get one. Make sure you contribute as much as you can and convert to a ‘real estate’ or self-directed IRA, which can be used to invest for higher returns.

5. Invest in Real Estate

Even with a few thousand dollars, there are ways to invest in real estate. It doesn’t take a genius to figure out how much better this can be than blowing the capital on hand. Use it to flip houses, as a down payment on an income producing rental property, to buy lots or land for long term holding either as an investment, inheritance or to build your dream home on in the future, or even partner up with someone on something larger.

6. Invest in Your Kids

Instead of simply investing in real estate, why not put it all together and set your kids up with some funds to invest in real estate for themselves. This way, they can start taking control of their financial future early.

7. More Tax Deductions

If you absolutely have to blow the money, at least do it on items which could potentially yield more tax deductions and write offs next year.

7 Real Estate Moves To Make With Your Tax Refund


House Investment (2)

It’s that time of the year again. Taxes are either something for you to look forward to or something you have been dreading all year. However, for those expecting to receive money back, make sure you put it to good use. Real estate investors, in particular, should consider using it for their company’s advantage. This can position any investor in a way that will help them take advantage of 2014.

Tax time is one of the biggest consumer spending times of the year. Many tighten their belts all year long in anticipation of a big refund check from the IRS. However, for most, putting a down payment on an expensive new car, buying a boat, or heading off to Disneyland isn’t the best financial move.

In the past, millions have blown their tax refund checks in a matter of days. Those that do may find themselves back in the red before their next set of bills reaches the mailbox. With that being said, what might be a better move to make with your ‘bonus’ from the Internal Revenue Service? Real estate investors should consider the following approaches:

1. Pay Down Debt

Paying down debt is a wise move for many. Cancelling out high rate car loans, pay day loans and credit cards could leave a lot more disposable income left on the table each week . Homeowners might be interested in putting down a chunk towards reducing the principal on their mortgage, liens affecting their home’s title, or even those still underwater – dedicating that cash to bring to the closing table.

2. Home Improvements

Homeowners planning to stay for the long run, those hoping to sell houses fast, and investors may benefit from home improvements. Each addition should improve the appeal of your property. Just make sure to do your homework and educate yourself on which types of improvements will not only yield positive results but deliver the maximum returns on the investment.

3. Get a Better Accountant

It might sound weird, but for those that didn’t get as much as they hoped for back from the tax man this year, perhaps investing in a better accountant for tax planning and filing for next year could deliver some of the best returns.

4. Fund Your IRA

If you don’t have an IRA, get one. Make sure you contribute as much as you can and convert to a ‘real estate’ or self-directed IRA, which can be used to invest for higher returns.

5. Invest in Real Estate

Even with a few thousand dollars, there are ways to invest in real estate. It doesn’t take a genius to figure out how much better this can be than blowing the capital on hand. Use it to flip houses, as a down payment on an income producing rental property, to buy lots or land for long term holding either as an investment, inheritance or to build your dream home on in the future, or even partner up with someone on something larger.

6. Invest in Your Kids

Instead of simply investing in real estate, why not put it all together and set your kids up with some funds to invest in real estate for themselves. This way, they can start taking control of their financial future early.

7. More Tax Deductions

If you absolutely have to blow the money, at least do it on items which could potentially yield more tax deductions and write offs next year.

– See more at: http://www.cthomesllc.com/2014/01/7-real-estate-moves-make-tax-refund/#sthash.gzA9ZWr2.dpuf