Financial considerations for buying small investment properties

Financial considerations for buying small investment properties

While the largest, real estate developers, for a particular project, consider the return on investment or ROI, in many cases, buying small, investment properties, often, seems to fail, to do so, with the same degree of attention and focus. For the purposes of this article, it will reference properties with 1-6 units and residential use. Many, instead of following this process, look at these buildings, and property, by the way, they experience buying their own personal house! However, it is important to identify and understand the intelligent, intelligent investors, an economic, return on investment, mentality, to determine whether it is an intelligent investment or not. The same rules apply, basically, whether, rent, ho, will stand - alone, house, or up to 6 units. Keeping this in mind, this article will try to consider, review, review and discuss any deal before closing some basic steps.

  

1. How much to spend for the property: 

a conservative approach, to consider, to spend the right price, to consider the total cost, because it is related, pure, on rent - roll. For example, an investment property purchased in $ 500,000 should generate net income, at least 6% per year, or $ 30,000 per year. Net fare roll, minus to provide 20%, considering a reserve and turnover for the vacancies, the net is obtained. Again, reduce this by spending taxes, mortgage interest, landlord - payments utilities, and reservations for repairs, renewal, and upgrades. Therefore, if there are taxes on that property, for example, $ 8,000, and utilities, $ 500, and mortgage interest, another $ 6,000, and you keep away, 1% a year, ($ 5,000) for stores, So, you have to add, $ 19,500 for the equation. Therefore, you will need total rent - after roll, 20% deduction, $ 49,500 per year (or slightly more $ 4,100 per month) Therefore, the total amount collected, should be approximately $ 5,166 per month (because you will need a budget, based on around $ 62,000, security - to make net, to avoid vacancies, etc.)

  

2. Cash Flow: 

Find a positive cash flow, therefore, owners of these types of properties, such as stress-free, possible. Comparison of your mortgage payments (including interest and principal), real estate taxes, and maintenance/repair/ renewal / up-keeping, costs, even if you stay within 80% of the rent, limitations

  

3. Competitive Approach: 

What is the fee for the prevailing/exclusive fares in the specific area? Rather than focusing on the high end of the market, a better approach, often, ranging from the middle boundary to the bottom and is demanding less business.

  

4. Turnover: 

The best scenario is meeting the needs and estimates of revenue while controlling the expenses. The smaller the tenants' business, the lesser the landlord's cost.

  

Investments in real estate, when done with caution, have been tried, and proven, approach, which makes sense, and usually offers many benefits, including the appreciation of the value of the property. Will you be an intelligent real estate investor?

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MOR.