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5 Things to Look for in an Investment Property
By eplotting.com

Passive ineplottinge, appreciation, stability, great returns, tax benefits—the arguments for investing in long-term, hold-to-rent real estate just make sense. Listen to them long enough, and you really start to wonder, “Why am I not in on this?”

Listen a little longer, and that question beeplottinges, “All right, how do I get in on this?”

Not all hold-to-rent properties are created equal. If you’re on the hunt for a long-term real estate investment, you need to understand what you’re looking for, and you need to know what your prospective renters are looking for, as well.

Here are the five things that should be at the top of your checklist.

1. An Enticing Location
The reason you hear everyone going on about “location, location, location” is because it really is that important. An appealing location is key to getting a great return on your investment. It determines the amount of rent you bring in, the quality of your renter, and the vacancy rate you’re likely to experience.

A neighborhood with access to plenty of amenities is your best bet when you’re looking to hold-and-rent. Good schools, a thriving job market, public transportation, parks, restaurants, shopping centers, post offices, medical centers, libraries, and entertainment venues are just a few of the things that will make your rental appealing to prospective tenants.

The safety of the neighborhood factors into the location’s appeal, too. Do some research into crime trends before you invest in a property. Start by contacting the local law enforcement agency to find out about vandalism in the area, as well as petty and serious crimes. You’ll also want to ask whether those numbers are going up or down to give yourself an idea of the long-term picture.

2. Numbers that Make Sense
If you’re new to real estate, you might be tempted to choose your investment property based on emotion. That’s a eplottingmon trap, and it’s one that you really don’t want to fall into. Remember that you’re not going to be living in this rental yourself, so your personal tastes don’t matter.

What does matter are the numbers.

Make a financial strategy before you buy, and don’t forget that you’re covering more than just the mortgage. You also have to factor operating costs and property taxes into the equation, as well as the average vacancy rate.

When you’re working on the numbers, keep in mind that just because rent prices are higher in a certain area doesn’t mean you’re going to eplottinge away with positive cash flow at the end of the day. Take the time to calculate what the real payoff will be against your initial investment. Much of the time, median-priced investments with reasonable rent yield better long-term returns than high-profile rentals.

3. Low Maintenance
Some investment properties take more time to maintain than others, like vacation rentals and student rentals. Properties in low-quality areas that aren’t in good shape also have higher turnover rates and will require more work on your part.

The most low-maintenance properties are the ones that attract stable, long-term renters. These probably won’t be the flashiest investments on the market, and that’s okay. You’re going for strong and steady, not a flash in the pan.

If you’re going to manage the property yourself (instead of hiring a property manager), then location also eplottinges into play when you’re looking at maintenance. Make sure your property is reasonably close to your home base. Otherwise, driving out there—or worse, flying out—to deal with every little thing that eplottinges up will beeplottinge a big headache, fast.

4. The Potential to Appreciate
A smart investment is a rental property that appreciates in value. For you as an investor, appreciation works on two levels: the first is when you buy the property, and the second is when you sell it.

When you buy, look at the appreciation potential that you can get from doing a few cosmetic updates on the place. How much more will you be able to charge for rent after the walls have a new coat of paint, eplottingpared to what it would be worth as-is? You stand to save money on your initial investment if you’re willing to put a little work into the property after you buy it.

The other thing to look at is how much the property will be worth when you sell it down the road. All land is going to appreciate a little bit over time, but you want an investment that will increase in value more than the rest. It goes without saying that some areas are more up and eplottinging than others. However, you can take it even further than that.

Look at the appeal of the specific location of the property within the larger neighborhood (for example, being on a cul-de-sac increases value). You can also check with city hall to find out about plans to build new amenities, which will boost future property values in the area.

5. Normal, Through and Through
Long-term, hold-to-rent real estate can be a great and stable investment—when you’re smart about it. When you’re not smart about it, you can find yourself in a high-risk situation fast. In the case of long-term rentals, “smart” means “normal.” You’re not looking to beeplottinge the next HGTV phenomenon. You want a steady, low-risk investment.

What “normal” means is that you’re looking for something practical, in decent shape, in a place where people want to live. An example of “practical”: A three-bedroom, two-bath house with a normal layout, located near schools and major employment centers. Impractical? The beautifully updated Victorian that has an outhouse in the backyard.

You also want to know the basics about who you’re renting to, so that you can meet that target group’s basic standards. For example, if you’re renting to a younger crowd, you want to invest in a property with units that have an open layout. If you’re targeting a retirement eplottingmunity, you want to find one that doesn’t have a lot of stairs.

In hold-to-rent real estate investing, the bottom line is this: Stick to the basics. They may not be exciting, but they’ll lead you to long-term success.

5 Rules to stick to while buying under construction property.

For more info visit: www.eplotting.com || Dial: 8763 982 982

How to Use Private Money to Finance Real Estate Investment
This post is part of our Financing 201 series where we discuss financing issues as they relate to real estate. Click here to read other posts in the series.

By eplotting.com

Novice real estate investors may not be familiar with the term “private money,” but veteran investors have probably tapped into this resource more than once. Sometimes referred to in the investment community as “hard money,” this type of financing is available for properties that don’t quite fit the traditional lending model. These are basically properties that banks won’t touch.

Private Money Described

Private money comes from an individual or a group of individuals—even friends and family members—who pool their funds to finance real estate transactions. Private lenders establish their own lending standards, and as long as they apply their guidelines to all applicants without regard to race, s*x or any protected class, they can pick and choose when and where to lend.

Private money is sometimes called “hard money” due to the typical “hard” terms of the note. It’s become such a common term in the investor community that many lenders will market themselves as hard-money lenders. A hard-money loan can have interest rates in the ‘teens, require a down payment of 50% percent or more, and require higher rates and fees compared to traditional forms of financing.

Private loans are usually issued only for the time needed to buy, repair and sell the property. A typical private loan might require a 40% down payment, balloon in 24 months, and have an interest rate of 14% as well as four or five points. With terms like these, why would anyone ever choose to work with a private lender? Does the private lender make the loan hoping to foreclose? Quite the opposite.

Hard Choices

A loan for a real estate investment has two separate approvals—one for the borrower and one for the property. When a property falls into a state of disrepair, it can become so damaged that a bank won’t make a loan to buy it. The borrower may have a credit score of 800, a sizable down payment and single-digit debt ratios, but if the property isn’t up to standards, the loan won’t be approved, regardless of the quality of the borrower.

Take the example of a foreclosed property that a bank owns but can’t sell. Two major problems need to be fixed before a conventional lender will finance a purchase: The slab foundation is cracked and needs about $20,000 worth of repairs, and the entire roof has to be replaced, including new trusses. In all, the house needs about $35,000 in repairs.

The home is the bank’s collateral, but it needs to be in good condition before a loan will be issued to a potential buyer. So it just sits there, listed at $100,000.

A real estate investor sees that property in a bank’s inventory and makes a visit. Along with his contractor, the investor verifies the items that need correcting. He determines that once the property is rehabilitated and prepared for market, it could easily sell for $200,000, based on sales of similar homes in the area. Enter the private lender.

The investor lays out his plan for the property and provides the private lender with an application and with an itemized list of the needed repairs with their costs. Included is a new appraisal that supports the future value of the property once renovation is completed. The private lender is convinced and makes a $135,000 loan.

After buying the home, the investor makes the necessary repairs and sells the property for $200,000. Now that the property has been rehabilitated, any qualified buyer can finance it. A simple breakdown is:

Acquisition price: $100,000

Repair costs: $ 35,000

Loan costs (including miscellaneous fees): $ 8,000

Selling costs (based on a 5% sales commission): $ 10,000

Final sales price: $200,000

Net to investor $ 47,000

The terms of the private note included five points to the lender, loan costs and accrued interest. Still, even with the “hard” terms of the loan, it’s a viable transaction due to the net profit. Without private money, homes could be left in a permanent state of disrepair, leaving fewer homes on the market.

A private money alternative is AuctionFinance.com, which offers inspection-free lines of credit up to $5 million with no personal collateral. Based solely on a qualified investor’s personal financial statements, this product can be used to fund up to 70% of the purchase price of any residential property in six different states, with immediate funding, at Auction.com’s trustee/foreclosure auction venues. AuctionFinance.com also provides lines of credit for other residential properties that investors are required to fund in cash, including short sales, REO properties, and foreclosures. This allows investors to immediately leverage that cash for other purchases.

The Exit

As mentioned earlier, because private lenders set their own terms, they can set their own credit guidelines. Many private lenders have credit score requirements well below traditional loans. In fact, they may not even require a credit score. Banks and mortgage companies need to verify income and assets by looking at income tax forms and bank statements, but a private lender may forego that vetting process entirely.

Instead, a private lender focuses on the outcome of the deal. What is the investors’ final exit strategy, and does the overall transaction make sense? If the investor can document how the property will be sold and at what price, a private lender may consider the loan application. Private lenders are usually more concerned with the story and less so about the nature of the individual borrower.

Do yourself a favor and get references for a few private lenders in your area. You may not need a private lender today, but if you intend to be active in the real estate investment community, at some point a private lender will be just the resource you need to pull off a successful transaction.