Real Estate Investments

 

"My ultimate desire is to protect families while assisting them in creating a strong foundation. Helping families accumulate wealth while protecting their most valuable assets, & leaving behind a great legacy;  offering each client the finest services so they could have the opportunity to, live the 'American Dream'! Whether you are just starting to purchase your very first home to accumulate income or you are currently an investor seeking additional Real Estate Income in order to achieve multiple streams of income, or you are already an investor seeking additional real estate income, I would like to design a program that best suits your needs and desires. I have an extensive list of investors with properties with a very competitive  ROI (rate of return) than other Real Estate Agencies or Companies"! 

                                                                                                        -- Petra M. Garza

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Basic Rental Properties

 

Throughout history, land ownership has been vital for society. The way homeownership works is a person will buy the property and rent it out to a tenant. Investing in land ownership dates all the way back to the year 1833 in The United States of America. This new way of owning property changed the way of practicing land ownership works. The way owning property works is, a person, purchases a piece of property and rents out the land to a tenant. The owner who is the landlord is ultimately responsible for paying the mortgage, taxes, and maintenance of the overall property.   Lastly, the tenant who is renting the property is held accountable for paying their rent on a month-to-month basis. 

 

Ideally, the landlord charges enough rent to cover all of the aforementioned costs. A landlord may also charge more in order to produce a monthly profit, but the most common strategy is to be patient and only charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit. Furthermore, the property may also have appreciated in value over the course of the mortgage, leaving the landlord with a more valuable asset. According to the U.S. Census Bureau, real estate in this country has consistently increased in value from 1940 to 2006. While there was a dip during the subprime mortgage meltdown of 2008 to 2010, it has now rebounded and has been increasing overall.

 

An investor must know the market in which he is searching for property or hire an expert to help. For investors seeking an income stream from rental properties, the most important aspects to consider are property location and market rental rates. As for location, many successful rentals are located in close proximity to major schools. For example, if you buy a property near a state university, students are likely to want to rent it year after year. There are also many other features of a profitable rental property, and some take the time to learn. For more, see Top 10 Features of a Profitable Rental Property.

 

There are, of course, blemishes on the face of what seems like an ideal investment. You can end up with a bad tenant who damages the property or, worse still, ends up having no tenant at all. This leaves you with a negative monthly cash flow, meaning that you might have to scramble to cover your mortgage payments. There is also the matter of finding the right property. You will want to pick an area where vacancy rates are low and choose a place that people will want to rent. 

Once you've found an ideal property in an area where people want to rent, use a mortgage calculator to determine the total cost of the property with interest. It's also worth researching different mortgage types in order to secure a favorable interest rate for your rental. 

 

Perhaps the biggest difference between a rental property and other investments is the amount of time and work you have to devote to caring for it. If you don't want to, you can hire a professional property manager. But his or her salary then becomes an expense that impacts your investment's profitability.

 

From the first decision to invest in real estate to actually buying your first rental property, there is a lot of work to be done. This task may be daunting for the first-time investor. Owning property is a tough business and the field is peppered with land mines that can obliterate your returns. Here we'll take a look at the top 10 things you should consider when shopping for an income property.

Top 10 Features of a Profitable Rental Property

Starting Your Search

Although you may want a real estate agent to help you complete the purchase of a rental property, you should start searching for your investment on your own. Having an agent can bring unnecessary pressure to buy before you have found a property that suits you. The most important thing is to take an unbiased approach to all the properties and neighborhoods within your investing range.

 

Your investing range will be limited by whether you intend to actively manage the property (be a landlord) or hire someone else to manage it. If you intend to actively manage, you should not get a property that's too far away from where you live. If you are going to get a property management company to look after it for you, your proximity to the property will be less of an issue.

 

Let's take a look at the top 10 things you should consider when searching for the right rental property.

1. Neighborhood: The quality of the neighborhood in which you buy will influence both the types of tenants you attract and how often you face vacancies. For example, if you buy in a neighborhood near a university, the chances are that your pool of potential tenants will be mainly made up of students and that you will face vacancies on a fairly regular basis (during summer, when students tend to return back home).

2. Property Taxes: Property taxes are not standard across the board and, as an investor planning to make money from rent, you want to be aware of how much you will be losing to taxes. High property taxes may not always be a bad thing if the neighborhood is an excellent place for long-term tenants, but the two do not necessarily go hand in hand. The town's assessment office will have all the tax information on file or you can talk to homeowners within the community.

3. Schools: Your tenants may have or be planning to have children, so they will need a place near a decent school. When you have found a good property near a school, you will want to check the quality of the school as this can affect the value of your investment. If the school has a poor reputation, prices will reflect your property's value poorly. Although you will be mostly concerned about the monthly cash flow, the overall value of your rental property comes into play when you eventually sell it.

4. Crime: No one wants to live next door to a hot spot for criminal activity. Go to the police or the public library for accurate crime statistics for various neighborhoods, rather than asking the homeowner who is hoping to sell the house to you. Items to look for are vandalism rates, serious crimes, petty crimes, and recent activity (growth or slow down). You might also want to ask about the frequency of police presence in your neighborhood.

5. Job Market: Locations with growing employment opportunities tend to attract more people – meaning more tenants. To find out how particular area rates, go directly to the U.S. Bureau of Labor Statistics or to your local library. If you notice an announcement for a new major company moving to the area, you can rest assured that workers will flock to the area. However, this may cause house prices to react (either negatively or positively) depending on the corporation moving in. The fallback point here is that if you would like the new corporation in your backyard, your renters probably will too.

6. Amenities: Check the potential neighborhood for current or projected parks, malls, gyms, movie theaters, public transport hubs, and all the other perks that attract renters. Cities, and sometimes even particular areas of a city, have loads of promotional literature that will give you an idea of where the best blend of public amenities and private property can be found.

7. Building Permits and Future Development: The municipal planning department will have information on all the new development that is coming or has been zoned into the area. If there are many new condos, business parks or malls going up in your area, it is probably a good growth area. However, watch out for new developments that could hurt the price of surrounding properties by, for example, causing the loss of an activity-friendly green space. The additional condos and/or new housing could also provide competition for your renters, so be aware of that possibility.

8. The number of Listings and Vacancies: If there is an unusually high number of listings for one particular neighborhood, this can either signal a seasonal cycle or a neighborhood that has "gone bad." Make sure you figure out which it is before you buy-in. You should also determine whether you can cover for any seasonal fluctuations in vacancies. Similar to listings, the vacancy rates will give you an idea of how successful you will be in attracting tenants. High vacancy rates force landlords to lower rents in order to snap up tenants. Low vacancy rates allow landlords to raise rental rates.

9. Rents: Rental income will be the bread and butter of your rental property, so you need to know what the average rent in the area is. If charging the average rent is not going to be enough to cover your mortgage payment, taxes, and other expenses, then you have to keep looking. Be sure to research the area well enough to gauge where the area will be headed in the next five years. If you can afford the area now, but major improvements are in store and property taxes are expected to increase, then what could be affordable now may mean bankruptcy later.

10. Natural Disasters: Insurance is another expense that you will have to subtract from your returns, so it is good to know just how much you will need to carry. If an area is prone to earthquakes or flooding, paying for the extra insurance can eat away your rental income.

Getting Information

Talk to renters as well as homeowners in the neighborhood. Renters will be far more honest about the negative aspects of the area because they have no investment in it. If you are set in a particular neighborhood, try to visit it at different times on different days of the week to see your future neighbors in action.

The Physical Property

In general, the best investment property for beginners is a residential, single-family dwelling or a condominium. Condos are low maintenance because the condo association is there to help with many of the external repairs, leaving you to worry about the interior. Because condos are not truly independent living units, however, they tend to garner lower rents and appreciate more slowly than single-family homes.

Single-family homes tend to attract longer-term renters in the form of families and couples. The reason families, or two adults in a relationship, are generally better tenants than one person is because they are more likely to be financially stable and pay the rent regularly. This owes to the simple fact that two can live almost as cheaply as one (as far as food, rent, and utilities go) while still enjoying the dual-income. As a landlord, you want to find a property and a neighborhood that is going to attract that type of demographic.

When you have the neighborhood narrowed down, look for a property that has appreciation potential and a good projected cash flow. Check out properties that are more expensive than you can afford as well as those within your reach – real estate can often sell below its listing price. Watch the listing prices of other properties and ask buyers about the final selling price to get an idea of what the market value really is in the neighborhood. For appreciation potential, you are looking for a property that, with a few cosmetic changes and some renovations, will attract tenants who are willing to pay out higher rents. This will also serve you well by raising the value of the house if you choose to sell it after a few years.

As far as cash flow, you are going to have to make an informed guess. Take the average rent for the neighborhood and subtract your expected monthly mortgage payment, property taxes (divided by 12 months), insurance costs (also divided by 12), and a generous allowance for maintenance and repairs. Don't lie to yourself and underestimate the cost of maintenance and repairs or you will pay for it once the deal is done. If all these figures come out even or, better yet, with a little leftover, you can now get your real estate agent to submit an offer and, if everything goes well, order business cards with Landlord emblazoned across the top.

Ready to Make the Move?

Make sure you get the best mortgage rate if you are looking to invest in a rental property. Petra M. Garza will assure you that you do.

 

Real Estate Flipping

Flipping is a term used primarily in the United States to describe purchasing a revenue-generating asset and quickly reselling (or "flipping") it for profit. Though flipping can apply to any asset, the term is most often applied to real estate and initial public offerings (IPOs). The term "flipping" is used by real estate investors to describe "residential redevelopment". Redevelopment of distressed or abandoned properties or neighborhoods has sometimes been linked to malicious and unscrupulous acts in the post-housing bubble era.

 

Profits from flipping real estate come from either buying low and selling high (often in a rapidly rising market), or buying a house that needs repair and fixing it up before reselling it for a profit ("fix and flip").

Under the "fix and flip" scenario, an investor or flipper will purchase a property at a discount price. The discount may be because of:

• the property's condition (e.g., the house needs major renovations and/or repairs which the owner either does not want, or cannot afford, to do), or

• the owner(s) needing to sell a property quickly (e.g., relocation, divorce, pending foreclosure).

The investor will then perform necessary renovations and repairs, and attempt to make a profit by selling the house quickly at a higher price. The "fix and flip" scenario is profitable to investors because the average homebuyer lacks the time and funds to repair and renovations, so they look for a property that is ready to move into. Also, most traditional mortgage lenders require the home to be habitable with no significant repairs.