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What to Look for in Income Property?

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By Joe Arias

Investing in rental properties is a great opportunity to establish an alternative source of income outside your main career. If done well, you can even retire early and live off your rental income. The key to investing in income properties is establishing strong criteria and understanding what to look for that would qualify a property as the right investment for you. By understanding exactly what to look for in the beginning, you can establish a strong filter when researching properties and only allow the ones that align with your investing strategy.

It’s important to establish the type of criteria you have for yourself. How much cash flow are you looking for a per deal? Some people live in markets where $200 per door is a healthy cash flow and is desirable. Other more expensive markets produce an average of $500 to $800 a door. Depending on how much cash flow you are interested in earning from a deal, further narrows the type of properties you will be buying.

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What price range can you afford? If you live in a state like California, an investment property may cost you upwards of $700,000 compared to states like Kentucky where a property may only cost $50,000. Budget what is possible for you. Some investors may house hack and leverage 5% down while others are forced to put 25% down. If you live in a market and know the prices, understand what type of financing you have accessibility to and what you can afford.

Are there certain specifications about the home that you prefer? Some investors do not want to purchase a home that may be 50 or 100 years old while other investors only look for those types of homes. Maybe you look for a certain bedroom count or amount of bathrooms. Some investors look for spaces that additional bathrooms or bathrooms can be added so a basement would be very beneficial.

Research different neighborhoods. Especially if you live in a large metropolitan area or city. Sometimes investing in one street and not the other can make a huge difference in the purchase price and potential rental comps. Schools may play a role as well. It is better to invest in a part of town with a good school district. People are willing to pay more for their kids to go to a good school.

The job market is critical when looking at the rental market. Are there enough employers in the area? There are markets across the country where the main employer in town is one factory and if they go out of business, so does the whole town. You want to make sure there are a large number of employers and companies in the area that can sustain a healthy job market.

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Overall, many different factors go into looking for income property. Each investor should develop their own criteria based on their situation and needs. By taking the time to assess what is important to you, you can make better decisions when refining your filter for different income properties that you search for.

Joe Arias

Joe Arias and his partners have flipped hundreds of properties in the Southern California Region. He has developed cutting-edge systems to simplify and scale the entire remodel process that can easily be applied to flipping, rentals, wholesaling, and other passive income strategies. More recently, Joe founded a real estate investing education company called RealSuccess Investments, allowing him to share his tools and systems with hundreds of up-and-coming investors. 

RealSuccess is focused on education on flipping, rentals, passive income, and wholesaling.

Joe is also a best-selling author. He has written 4 books: Finding your RealSuccess, First Steps to Flipping, R stands for Rentals and Retirement, and Wholesaling Real Estate.

“I came from Argentina when I was 20, I am 40 years old now. I didn’t know anyone, I am CERO generation, usually people say, I am first or second generation but I was the one that crossed the border, no language, no friends, no family, no money, nothing, nada… If I can do it, anyone can.”

From a young latino immigrant  to a celebrated real estate investor, Joe is a true testament to hard work and discipline. As an investor, he has made it his mission to help others achieve financial freedom while enjoying living a life of passion, fulfillment, and empowerment.

RealSuccess Website

www.ourrealsuccess.com

Personal Instagram: 

https://www.instagram.com/joeariasinvestor/

Real Estate Investment- Instagram: 

Instagram: https://www.instagram.com/realsuccesseducation/

Video For Finding Money from All Day Training (10 Hour Seminar)

https://vimeo.com/manage/videos/528446162

1 Hour Webinar

https://vimeo.com/manage/videos/530996751

Amazon Book#1:

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Meet the Masters in Orange County – January 10 & 11

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Dear Real Estate Investors,

Our Realty411 friend, Jason Hartman, is hosting his annual “Meet the Masters of Income Property” event in Southern California. We want to let you know about this fantastic weekend filled with quality education and curated income properties as it is just 10 days away.
Jason is host of one of the most popular real estate podcasts in the world, The Creating Wealth Show. He brings his own experience with over 20 years as a successful investor and some of the top experts in the industry. 
Register to attend “Meet the Masters” for a powerhouse education that will revolutionize how you think about money and wealth. Make 2015 your best year ever! 

Date: January 10-11, 2015

Location: Hotel Irvine – Irvine, CA

Time: Saturday & Sunday: 9am to 6pm

 

 

The Real Estate Indicator Is Screaming “Buy”

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I just locked down a 2.875% interest rate, fixed for the 15-year term of the mortgage. No points. With rates like these, I find myself rethinking the idea that I want to pay off my mortgage.

I can do a lot better than 2.875% investing the money. If I just sock it away in gold, I bet I’ll come out way ahead. Finding investments that clear such a low hurdle is not that difficult.

Right now is a great time to do this, if looked at from a historical perspective. The 10-year Treasury rate is 1.64% as I write. That is what investors are willing to accept to lend money to the US Treasury for a 10-year term. It seems absolutely crazy. But the Treasury rate we see is something of a forced smile.

The US Federal Reserve, as you know, pledges to keep rates low. So interest rates — probably the most important prices in the whole constellation of prices — are essentially the victim of price fixing. This will have sickening consequences down the road for the US economy, the stock market, the US dollar and more. But for now, it is a license to print money by borrowing cheaply and investing in rental property.

To see why, you have to understand that Treasury rates are the platforms on which borrowing rates stand. I was a banker before I started writing newsletters. I remember following the “Treasury curve” (all the Treasury rates for different terms) with great interest because we priced our loans off Treasury rates. So if I were in banking today, I might quote a rate of 250 basis points over the 10-year Treasury rate. That would be 1.64% plus 2.50%, for a rate of 4.14%. The rate would change as the Treasury rate changed, or until locked in.

So that’s why Treasury rates are so important. Now let’s look at cap rates.

A cap rate is a real estate term you should know. It’s easy and intuitive to understand. It is basically the return you earn as an owner in the property. So if you buy a property for a million bucks and it generates $100,000 in profits for you after expenses, then the property has a 10% cap rate. (The $100,000 divided by your $1 million purchase price.)

The cap rates available in real estate are attractive when viewed against the 10-year Treasury yield. A wider spread between the two means you can earn a wider profit margin. As you can see in the chart below, the post-2008 spread is the widest it’s been since the great 2002 bottom.

Best Time to Own Real Estate

So this idea — as with almost all investment ideas — has a limited window of opportunity. When the low interest rate party starts to get into the wee hours and the barmen look ready to make a last call, we’ll have to diligently step for the exit to beat the rush. That won’t happen until at least 2014.

Another caveat to my bullish real estate call is that you have to be a little picky. Not everything is cheap. Already, some of the best properties in the biggest cities are at full price. You get much better value if you look at secondary cities.

As I’ve noted before, the opportunity in real estate is especially attractive because there is still a lot of debt coming due. Including 2012, and through 2016, there is $1.7 trillion in commercial real estate debt coming due. (In Europe, there is nearly a trillion dollars of debt maturing in just the next three years.) Borrowers will have to refinance that pile. They will likely have to put cash in the deal — or sell. The latter creates great opportunities for real estate investors.

My own 2.875% mortgage reminded me of the advantages afforded those with good credit and their ability to borrow at super-attractive rates.  The same is true in the corporate world.  Now is the best time to use these advantages in real estate investing since 2002.

 

This article post was provided courtesy of Marco Santarelli with Norada Real Estate Investments (www.NoradaRealEstate.com)

Norada Real Estate Investments helps take the guesswork out of real estate investing.  By researching top real estate growth markets and structuring complete turn-key real estate investments, we help you succeed by minimizing risk and maximizing profitability.