How To Buy A Rental Property

How to buy a rental property

Statistic reports that in 2019, there were 14.5 households, 44 million residents, renting single-family homes in the U.S. Urban.org predicts a 21% rise in new rental households between 2020-2040.

Although single-family rentals can often generate strong, steady cash flows, it takes a lot of hard work to own rental real estate.

This article will discuss five steps to purchasing a rental property and the pros and cons associated with investing in real estate.

Is buying a rental property the best choice?

In just a few minutes, we’ll go over the basics of buying rental property. It is important to consider whether renting a property is the right choice for you.

The Internal Revenue Service may classify rental income as a passive activity. However, real estate investments require active participation and a willingness to take on more risk in return for higher potential rewards.

Real estate investors may need to continue oversight of their investments even if they hire a local property management company. Investors may have to approve certain repairs or improvements and review their financial statements monthly and annually, including the income statement, net cash flow report, and annual reconciliations.

Even with the best tenant screening, investors may find themselves with tenants who pay late rent or need to be evicted. Evictions can lead to lost rental income, which can quickly reduce potential profits and lower overall returns. It can also be costly and time-consuming to manage the eviction process.

A good investment property can offer the perfect triplet of recurring rental income and long-term appreciation in property values. Tax benefits are also available by deducting operating expenses and depreciation.

However, savvy investors consider the risks and benefits of investing before they make a move.

How to become a landlord and buy your first rental property in 5 steps

There are five steps you should follow once you have decided that renting a property is the right investment.

1. Arrange financing

A single-family rental property is different than a mortgage application for a primary residence. The down payments are larger, the lender fees and interest rates slightly higher, and you will need to meet different criteria.

  • The down payments range from 20% to 25% of the property’s purchase price. Some investors refinance their homes to make a down payment.
  • Experian states that a credit score of 720 is necessary to get the best loan terms. However, it is possible to buy an investment property even if your credit score is lower.
  • The borrower documents are copies of tax returns and bank statements. Proof of income is also required (similar to applying for a loan for a primary residence).
  • If periodic income is lower or expenses are greater than expected, lenders may request up to six months’ worth of mortgage payments in a reserve account.

There are many options for financing a rental property. Although there are more steps to take, there are still plenty of options. Conventional lenders, like banks and credit unions, offer loans backed by Fannie Mae and Freddie Mac. 

Other investors can obtain rental property financing through private lenders, or by forming a joint venture.

2. Learn about rental property returns

Real estate investors use return on investment (ROI), a financial metric, to determine the potential profitability of an investment property. An investor must know the following information to calculate the ROI for a property:

  • Annual rental income, including tenant rent and any additional income such as pet rent, is estimated
  • Estimate the annual operating costs, including property management fees, repairs, insurance, and taxes
  • Calculate annual cash flow by subtracting expenses from income to forecast
  • Calculate the down payment and other upfront cash, such as repairs that are needed
  • Calculate ROI by multiplying the annual cash flow by the total cash invested.

As an example, let’s say a rental property generates $18,000 in annual rental income. Operating expenses equal 50% of the income and the annual mortgage payment totals $6,000 (principal & interest only).

An investor would receive 8% if they made a down payment of $37500

  • Annual cash flow = $18,000 rental income – $9,000 operating expenses – $6,000 mortgage payment = $3,000 cash flow before taxes
  • ROI = Before-tax cash flow/ Total investment
  • $3,000 Cash flow before taxes / $37500 Total investment = 8.0%
How To Buy A Rental Property

3. Locate a rental property

Choosing the right rental property or the best real estate market is only one of the many factors you should consider.

  • Employment and population growth
  • percent of households occupied by renters
  • Rising rent prices and falling vacancy rates
  • Long-term appreciation may be possible due to historic changes in home values
  • Rating of the neighborhood, including quality school districts and employment rates
  • A turnkey single-family rental property that has a tenant (or a home ready to rent) is an option. This helps reduce the risk for first-time investors.
  • The rates of property tax can differ from one state to another, which can have a significant impact on your potential ROI.

You can purchase a house for sale online at many places, such as Zillow, Trulia, and Realtor.com. Most listings are only for people looking to purchase a primary residence.

4. If you are not able to manage your property yourself, hire a property manager

It can be difficult to become a landlord. You must manage a rental property by finding and screening tenants, collecting rent, and making repairs.

To keep rental property revenues growing and operating costs under control, landlords must comply with all applicable state and local landlord-tenant laws.

A local property manager is often hired by those who don’t have enough time to manage the property. A property manager can allow investors to reap the benefits of owning rental properties while also avoiding the headaches associated with being a landlord. 

Rental property managers are skilled in managing day-to-day operations so investors can concentrate on creating passive income streams and buying rental properties in the best markets to maximize their returns.

5. Keep track of income and expenses

Even experienced investors can find it difficult to keep track of income and expenses from rental properties. The following are common income and expenses that can impact the rental return of a home:

  • Rent income
  • Deposit security
  • Other income (pet, storage, laundry, roommate, etc.
  • Leasing fees
  • Fees for property management
  • Maintenance and repairs
  • Landscaping
  • Pest control
  • Sometimes, utilities are included in small multifamily properties.
  • Mortgage payments
  • Insurance
  • Property taxes
  • HOA fees
  • Depreciation expense
  • Owner expenses (such as a trip to an out-of-state property)
How To Buy A Rental Property

Tips for purchasing a great rental property

Roberti is the founder of the Rich Dad Company. He once stated that “Real Estate investing, even on an extremely small scale, remains a proven and trusted method of building one’s cash flow, and wealth.”

Although this may seem true, not all homes are good investments. Here are some tips to help you buy a great rental property.

  • Investing in real estate requires a long-term view.
  • The financial metrics for rental property investing include ROI, cash flow, cash on cash return, and cash flow. This guide will help you analyze real estate deals.
  • Before you decide what or where to purchase a rental property, it is important to thoroughly analyze each market.

There are other options for purchasing your first rental property.

In some markets, it is becoming harder to find the funds necessary to pay a large down payment in order to rent a property. There are many other options for purchasing a rental property, which require less money.

  • Rent out a bedroom in your home and then use the additional income to pay down an existing mortgage or raise funds for a downpayment.
  • Buy a small duplex/triplex and live in one of the units, you can use an FHA multifamily mortgage. 
  • A joint venture with another real estate investor can reduce the cash required to buy a rental home.
Marketing When Selling a Home

The Importance of Marketing When Selling a Home

Comprehensive Marketing When Selling a Home

When you are selling your home you’ll want to hire a real estate agent that has a comprehensive marketing program. Exposing your home to every possible prospective buyer is critical. Many real estate agents have a marketing presentation that they do for their prospective clients. Ask the agents that you are interviewing or the agent you hire to email you or give you a copy of their marketing program in writing.

The Local Multiple Listing System

Most real estate agents belong to their local multiple listing system (MLS.) It’s a good idea to ask your agent to be sure. Having your listing in the local MLS is crucial. Some multiple listing systems have tens of thousands of real estate agent members. It’s not very common for your real estate agent to also have the buyer for your home. Most of the time another agent from another real estate company has the buyer for your home. When your listing is in the MLS all of the agent members have access to it. They can show your listing to their buyers and schedule an appointment to show them your home.

Professional Quality Listing Photos

Having professional-quality photos of your house is extremely important. These photos will go in the MLS and online where over 90% of buyers will see your home for the first time. Ask your real estate agent if they hire a real estate photography company to take the listing photos or if they take the photos themselves. If your agent takes the photos herself and has a professional camera and a wide lens, the photos should be of good quality. Some agents get training and know the best camera settings for real estate photos.

A Yard Sign

It’s important to have a for sale sign in your yard. You never know if there’s a neighbor who has a family member or friend interested in moving to your subdivision or neighborhood. Also, some buyers will drive around areas that they are interested in to see if there are any for sale signs. Sometimes people drive around looking for open houses, as well. If they see your for sale sign and like the looks of your house from the outside, they can call your agent from the phone number on the sign or give their agent the address to get more information about your house.

Flyers and Brochures

Many real estate brokers have a flyer or brochure created with photos of your home and highlights of your home on it. It’s wise to have these flyers or brochures in your house for buyers and their agents to pick up during showings. When buyers are looking at houses they might see quite a few if they spend the day with their agent looking. Having a brochure with photos on it for them to take will remind them of your home. Seeing the photos again might get them excited about your home. Some agents also have a brochure box attached to the sign in the yard so people driving or walking by can take a flyer.

The Internet

The internet is the number one and most important place to market and expose your listing to potential buyers. Well over 90% of buyers look on the internet for homes before they go out and see them in person with their agent. Some of the top real estate websites are Realtor.com, Trulia.com, Zillow.com, and Homes.com.  Although it is not so widely known that in some areas, Zillow is not as accurate as a local real estate agents website, because of the lack of MLS access.

Quite a few real estate websites will upload your listing from the MLS so your house will be on many websites. It’s best to have this maximum internet exposure. Some websites will just have the front photo of your home on them. Some will have many photos on them, which is even better.

Open Houses

Some real estate agents host one or a few open houses for their listings. Some don’t host them at all. A small percentage of home sales comes from open houses. However, it is still one way that the buyer for your home could come walking through your door. Many times nosey neighbors will come through your open house to see what it looks like compared to theirs. This is especially true if they are thinking of selling their house or if they currently have it listed.

Broker Tours

Some real estate agents host a broker tour, especially when the house is new to the market. They can advertise this in their MLS and send out emails to other agents in their office and in the area. Sometimes they provide and serve a catered lunch and sometimes they don’t serve any food. If your agent has a broker tour as part of their marketing program, talk to her about the type of broker tour you are most comfortable with.

Broker Tours

Postcards

Another marketing idea is postcards. Your broker can create postcards to send to your neighborhood announcing the new listing. She may also send postcards out to other neighborhoods or areas that might have a buyer for your home. For example, some agents send postcards to apartment complex tenants if their listing is a good fit for a first time homebuyer. Or they may send postcards to homes in a subdivision that has homes in the $200,000-$300,000 range if their listing is in a $400,000 and up neighborhood. Your home may appeal to someone wanting to move up to a larger and higher-priced home.

Email Drip Campaigns

Email drip campaigns are popular nowadays. Your real estate agent can send your listing to other agents, other real estate offices, attorneys, inspectors, plumbers, electricians, lenders and other people in a real estate related field. You never know who might know someone on the market to buy a home like yours.

Print Advertising

Print advertising is another way to advertise your listing. It’s not as popular nowadays since the internet has taken over. However, you never know who is going to pick up a real estate book and browse through it. Print advertising may be more effective for houses that fall in a specific category such as farms, ranches, beach homes, and mountain homes.

Showing Follow-Up

Your real estate agent should have a system in place for following up with agents who show your home. Some agents pay a showing company for the service of taking care of scheduling appointments and follow-up for them. It’s important to know what buyers are saying about your home. It also gives your agent another reason to get your listing in front of the agents that have shown it. It’s a good idea to remind them about your home. There may be a price drop, or a new upgrade in your home that is worth telling the agents about. This is an important piece of the marketing program.

It’s important to talk to your real estate agent about their marketing program. Some of the aforementioned marketing ideas may not be included in a real estate agent’s marketing portfolio. It doesn’t hurt to ask them to include something they don’t automatically offer if there is something specifically important to you. Your real estate agent should do everything possible to sell your home for the most money, in the least amount of time, and with the least amount of stress to you.

The Big Easy

Orlando real estate

New Orleans is known by many names: the Big Easy, New Orleanians like to take it easy. Life seems to slow down here and people take the time to get to know one another; The Crescent City, the mighty Mississippi River cuts through the heart of the city and give New Orleans it the  unique shape of a crescent moon; The City That Care Forgot, Some say this name comes from the idea that people can forget their cares here, others say that the name refers to New Orleans’ history of trials and tribulation.

 

 

 

 

One Of The Fastest Growing Cities In America


Making countless top 10 lists, The Big Easy has become a top spot to not only visit, but to live. And why shouldn’t it be? Located on the Gulf Coast, the city serves as a natural gateway. And relatively low taxes and low costs of living make it a no-brainer when you consider the incredible amount of contributions the city has to offer.

Let’s Celebrate!

No matter the time of year, there is always a festival going on somewhere in New Orleans or on the Northshore. The people of New Orleans celebrate everything from the Day of the Dead to the well known Mardi Gras hoopla every spring. You can be assured, If you’re here on a weekend, there’s a strong chance that a festival is going on somewhere and that means great music, incredible food, friendly people, and strong drinks.

A City for Adventure

Once you get to the city you will want to explore! Taking tours and reading brochures are great and support the economy but if you want to get to know the city, you’ll want to get out and discover for yourself the mysteries that the city of New Orleans holds within her myriad of neighborhoods and nooks.

The city holds a wonderful old world quality that makes this particular activity so much fun. Pick a somewhere like the French Quarter or Uptown, and just see what you can find. Consider bringing a bike or at least good walking shoes.

 

Getting Around

New Orleans is famous for it’s streetcars and rightly so as they have some serious history. Its St. Charles line, known as the green cars, serves as the oldest continually operating public rail transportation in the entire world! Most cities in the country updated their streetcar lines and trolley cars to buses, however, New Orleans, ever hesitant to embrace change, decided to keep its major streetcar lines adding to the ambience that now infiltrates the city. Due to the popularity, cost efficiency, and low pollution of the green line streetcars, new lines, known as the red cars, are currently being added throughout the city and more are in the works for the future.

 

New Orleans has no hills, if you don’t count the man-made levees and Monkey Hill at the Audubon Zoo, making it a perfect city for biking. Recent road reconstruction in the city has created almost 100 new miles of bike paths and has made bike lanes on most of it’s major avenues. It’s one of the more fun and easier ways to get around and now the city offers bike kiosks where you can rent a bike in one place and return it at another.

Culturally Rich

New Orleans has become one of the most visited cities in America. The culturally rich city offers a large variety of major attractions, from the electrifying clubs on Frenchmen Street and the old-world charm of the French Quarter to the oak tree lined, St. Charles Avenue (home to both Tulane and Loyola Universities) and many of the stately 19th-century mansions.

A City of Water

Orlando real estate

The city is located in the southeastern most tip of Louisiana with the Mississippi River cutting through it’s heart.  The state of Louisiana is known for some of the best fishing in the country and NOLA is built around water.  Many people fly into New Orleans to take a fishing charter out of Venice LA

New Orleans It is bordered on one side by the manmade Lake Pontchartrain to the north and the Gulf of Mexico to the east. New Orleans is named after Philippe II, Duke of Orléans, Regent of France, and is one of the oldest cities in the United States. The city is known for its multicultural heritage as well as its music and cuisine, and is considered the birthplace of jazz.

wilmington real estate

Buying a Home in Wilmington?

Wilmington – A Great Place to Live

If you’re looking for a good place to live, to purchase your dream home and find a career and possibly even start a family, look no further than Wilmington, North Carolina.

On the coast of the Atlantic Ocean, Wilmington NC is in the southeastern tip of North Carolina. With a little over 100,000 residents in city limits, and a little over 260,000 residents in the metropolitan area, Wilmington has perfected the mesh of the historically charming small-town, southern life with the comfort and convenience of the big city amenities.

Why Wilmington?

Over the last decade or so, Wilmington has attracted and maintained a very favorable business attitude, which combined with the abundance of arts and culture, the top-of-the-line higher education establishments, and the gorgeous East Coast beaches, has garnered Wilmington, North Carolina’s healthy and expanding real estate market. Wilmington is often found at the top of lists of cities in which to invest in real estate.  Lastly many people travel to Wilmington for the sandy beaches and historical importance.

Whether you’re in town for the swimming in the ocean and sunbathing on the beaches, or to visit the many restaurants, shops, museums, or the World War II battleship, North Carolina, you’re sure to fall in love with this picturesque southern town.

wilmington NCFeeling like you want to move here? Don’t feel afraid of finding a good career to support your lifestyle—many industry giants call Wilmington their home, like General Electric, DuPont and more. Wilmington has also been recognized as a great place to start your own business or buy your first home. Want to raise your family here? New Hanover Schools are considered one of the best school systems in the state. Wilmington is also home to The University of North Carolina at Wilmington (UNC-W), which, among other fields of study, has a nationally accredited business school and one of the best marine biology programs in the world.

And to account for your older self, the reasonable cost of living, low taxes, quality health care, temperate climate, and opportunities for culture and recreation make North Carolina one of the best places in the country to retire.

There is no shortage of friendly neighborhoods with that good ‘ole southern charm in Wilmington, North Carolina. With several new home developments, some established golfing neighborhoods, and the historic neighborhoods, there’s a wide variety of real estate within Wilmington.

Things to do in Wilmington NC

Golfing neighborhoods include Porter’s Neck Plantation, Echo Farms, Cape Fear Country Club, and Landfall. New home developments include Marsh Oaks, Parkside at Mayfaire, Seagrove, Tanbridge Park, The Villages at Summerset, Weldon, Salt Grass, Stones Edge, Anchor’s Bend, Clarendon Park, Sycamore Grove, Covil Crossing. And finally, some of the historic neighborhoods include Castle Hayne, Pine Valley Estates, Forest Hills, Sunset Park, Historic Downtown Wilmington, Myrtle Grove, Masonboro, Monkey Junction, Ogden, Bradley Creek, and Wrightsboro.

About 72% of Wilmington is White, while 20% is Black, and 6% Hispanic. 18% of residents are under 18 years of age, 17% aged 18 to 24, and nearly 30% aged 25 to 44. The median age in Wilmington is around 34 years old. 34% of residents are married couples, and about 20% have children under 18 living at home. Nearly 50% of residents were non-families.

The median household income in Wilmington is right above $30,000, and for families the median income is right about $42,000.