Monthly Archives: August 2022

Investment Rental Properties When Its Time to Buy or Sell

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How does one determine when to sell a rental property investment? If you are going to buy rental properties having a plan in place for the appropriate time to sell is important.

I have worked with many individuals over the years and showed them how to buy rental property. There are many things that need to be considered when purchasing for investment purposes. There is also definitely a time to sell.

How to Buy an Investment Property

-Is the property in a convenient location? Is it near shopping, in a neighborhood with good schools, and is it easily accessible to interstates and connecting roads?

-Does the potential investment property have a sound foundation? What sort of issues does the home have? If it needs a new roof or the foundation is sunken in and is creating issues within the structure, it might not be a good investment at this time. If the issues are only cosmetic (needs a new bathroom floor, or painting, or carpeting) it may be worthwhile. Inspection reports will reveal the propertys flaws so the buyer and real estate professional can make a good decision.

-Do you have enough of a down payment to purchase the rental property so financing will not be an issue? In the current real estate market, most lenders will see a down payment of 40-50% as a good risk. If you can invest 100% into the property this is even better.

-Income gained from the property needs to exceed expenses. Identify a credit worthy tenant, a reliable property manager, and a solid lease to make your property investment profitable. Property management fees are tax deductible.

-For residential property investments, single-family homes as well as multi-tenant properties such as duplexes and fourplexes are great ways to build income and wealth. Some investors may want to consider apartment complexes. In this case a commercial property loan will be necessary to obtain financing.

-Use depreciation on the investment property as a way to receive an annual tax deduction. Check with your accountant, who will apply the depreciation deduction on the building, appliances — even window treatments. The government still allows tax deductions for accelerated depreciation on properties. Savvy real estate investors use this deduction to increase cash flow and net operating profit on a property.

When to Sell a Rental Property

I have a term for properties that need to be sold: alligator properties. These are properties that are eating the investor alive with carrying costs. When an investor looks at the bottom line on an alligator property there is no profit just expenses. An alligator property today may have been a good investment ten years ago. But some individuals will continue to hold a property until it depletes all of the profits they may have made in the first 5-7 years.

If a property has sentimental value (it was your first home, or your mother once owned it but now shes deceased), some investors may tend to want to hold onto it. Having an emotional attachment to an investment property that is supposed to be generating income is not good. Sometimes an individual will hold this type of property even if it is not profitable. It may be time to consider selling this property.

Ten Tips for buying Rental Properties

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Buying rental properties is a good way to increase your assets. However, choosing the right rental property will be challenging. Here are a few things to check for prior to buying rental property.

1. Location – Most people don’t want to live in the boon docks. The location of your rental property will determine how easy it will be to rent. If you have a lot of vehicle traffic, you may receive a greater response from a sign at the location than you will from a newspaper add.

Tenants want to live in nice neighborhoods close to all the amenities. They want to be close to the schools, stores, recreational locations, hospitals, and work.

I haven’t met anyone who wants to live in an undesirable neighborhood or drive 15 minutes for a gallon of milk.

2. Numbers – When buying rental property you want to check the numbers. Make sure you have all the expenses associated with that property and make sure it still has a positive cash flow.

Take into consideration the maintenance issues, any utilities not covered by tenant and amortize the cost of the big projects like furnace replacement, new roofing, siding or landscaping.

These projects only happen once every 15-20 years but you may be coming in to this in the 10th year of that cycle. Remember to calculate your expenses high and your income low. This can save you some surprises down the road.

Expect the unit to be empty at least one month per year due to turn over. You will have to repaint and clean the carpets the first 2 weeks, then advertise and show the next 2 weeks. You should only count on 11 months of rent per year.

3. Lower Maintenance Buildings – You want to avoid homes that will require expensive routine maintenance. Some examples would be homes that have cedar-shake shingles or siding, wood sided buildings, wood frame windows, brick driveways, cedar decks, etc.

Try to look down the road and determine the future maintenance needs. Remember the lower the maintenance the less headaches and larger profits.

4. Higher Home Prices – Check in towns with higher home prices, because this increases the demand for rental property. Look for the ugly house on the block that has a lower price, enabling you to purchase within the margins.

After some interior and exterior paint, a little light landscaping and new curtains, viola’, a house that will get premium rent because of the class of neighborhood.

If people can not afford to buy a home in this class they will have to rent. This will create a demand for rental property.

5. Below Market Rent prices – When buying rental property, look for rental property which has rent prices that are below current market rents. This will allow you to raise the rent and increase the value of the property. As per above, this may just need a little fluff to enable raising the rental price.

Rental property market value is determined by the amount of income received by the rental property. However keep in mind, if the rental property has renters when you purchase it, they may not like it when you raise the rent. Also check to see what type of lease is in place. The lease goes with the sale.

Toyota Camry Vacation Rental

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Two of my passions are traveling and cars. One of my favorite parts of traveling around the United States has always been getting a rental car. It gives me a chance to try out something new, without the expense of swapping vehicles every time I get the itch. Last weekend, my family and I traveled to Florida for a quick vacation. We were all excited about the beach. Selfishly, I was also excited about test-driving our rented Toyota Corolla. Miami roads offered a great landscape for our weekend test-drive, and here are a few reasons why I really enjoyed my time in our 2011 Camry rental:

Comfort: Most drivers think that the size of a vehicle determines the overall comfort. Toyota Camry drives will tell you that your car does not have to be as big as your boat to be comfortable. The Camry is a well-designed mid-size vehicle. I found that the size provided my family and me with plenty of cabin room, and a good amount of space in the trunk for our luggage. With the advances in technology and design carmakers are creating vehicles that offer drivers a comfortable place for Toyota Camry customers, and their families to relax as they cruise smoothly down the road.

Style: One thing is certain, when you start a family the sports car is quickly phased out. However, it doesnt mean that the young feeling you have on the inside cant still be reflected in the car you drive. Like the Corolla, the Camry is dependable, economical, and has a timeless look. This is one of the reasons used Toyota Corolla and Camry drivers choose the brand.

Affordability: It does not matter if you purchase a new or used certified Toyota, Camry is well equipped and well priced to fit in your budget with four options:

-The Camry LE starts at $21,650
-The Camry SE starts at $22,965
-The Camry XLE starts at $26,725
-The Camry Hybrid starts at $27,050

Just recently, the 2011 Toyota Camry was ranked as one of the top twenty most affordable midsize cars in a recent poll. In 2010, the Toyota Camry was the U.S. News Best Midsize Car for the Money Award for the second year in a row. It is also affordable when filling up at the pump. Getting twenty-two miles in the city and thirty-three miles on the highway, the Camry is solid all around.

Speed: The Camry accelerates quickly on the highway without disturbing the passengers. Merging on Floridas busy multi-lane highways proved to be a piece of cake in the 2011 model.

We had a great weekend in Florida, and after spending several days driving the 2011 Camry, I would recommend that you consider checking out the vehicle if you are in the market for a new car. If an SUV is more your style, Toyota Rav4 drivers would most likely steer you in their direction. Either way, you cant go wrong!