What Makes a Good Rental Property?

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What makes a good or great rental property is a personal decision. It depends on the types of tenants you want to deal with. The vacancy rate you’re willing to deal with (which can include vandalism and other property crimes). The amount of profit you want to earn on your investment. And a host of other questions or issues that you need to be knowledgeable about before making a long term investment.

Where to Find Neighborhood Information

As an investor, you’re best off doing your own research of neighborhoods before investing. The type of information you want to learn includes:

Property taxes – from your local tax assessment office.

School quality – state and local superintendent of schools

Crime – local police departments

Employment – U.S. Bureau of Labor Statistics

Amenities – visit the neighborhood and take notice of parks, malls, gyms, movie theaters, public transport hubs, and all the other amenities. Future developments and building permits – municipal planning department.

Real estate listings and vacancies – local real estate and property management companies.

Rents – property management companies, advertisements, door-to-door survey.

One very good source of information is visiting neighborhoods during evening hours and on weekends when people are home from work. Talk to people working in their yards and walking dogs. Try to find renters in the neighborhood. Renters are more likely to give you the most realistic opinion of the neighborhood because they don’t have a financial investment. Once you have a significant interest in a specific neighborhood, visit it on different days of the week and different times of the day to gain real knowledge of what goes on at different times.

Understanding Income Levels

In my personal opinion, I favor rentals in urban settings that have a dense population of working class people. Neighborhoods with a mix of rental properties and homeowners. These are often a short distance from inner city war zones where gangsters rule instead of the police, vandalism is high, and the unemployed can’t make the rent payment. Don’t get me wrong, I certainly don’t recommend investing in these war zones. However, adjacent or a short distant from them is where you often find neighborhoods that are a mix of rentals and homeowners where blue collar workers take care of homes and work with police to keep the crime level down.

Of course, income levels across the U.S. vary significantly from region to region and state to state but the most recent Census Bureau numbers show the national medium income at $51,324. Other statistics show that households earning above the income medium have a home ownership rate of 79.5% and those earning below the medium income have a home ownership rate of 49.8%. What this implies is that neighborhoods with average incomes slightly below the national average are going to be a good mix of rentals and homeowners.

Finding the Right Mix

Each city has good cities and towns. Each city and town has good neighborhoods. And many neighborhoods have good rental properties. The secret to a good rental investment is doing the research to make all three characteristics line up. Successful real estate investing doesn’t start with buying just any old property that is currently available. It begins with deep research to find the best rental neighborhood you can and then finding or waiting for the best property to come on the market.

Are Home Prices About to Dip?

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The spike expected in homes prices during the traditionally busy spring and summer buying season never really developed. Prices in much of the nation remain higher than a year ago but didn’t go up as much as expected. Last year the gain from the second quarter to the third was three percent. This year it looks to be a meager one percent based on early data. That’s despite of a lower inventory of houses available for sale.

Could it be that the small gain during what should have been a busy buying season is a forewarning that prices may go negative as we enter the slow seasons of fall and winter? The western market may be a leading indicator.

Distressed Western Market Shrinks

According to Clear Capital, the West, which has some of the largest metropolitan markets in the nation, has seen a dramatic drop in the sales of distressed houses. In 2009, at the peak of distressed home sales, a full half of all sales were distressed houses. Today that number has dropped to about 12 percent.

For major investors, this means looking to the South and Midwest for better investment opportunities where distressed properties are still selling at bargain prices. Fewer buyers in the West mean less price appreciation and the possibility of prices actually declining for the first time since the bottom of the Great Recession. Regarding home values, the West has been the trendsetter. It could be an indication that as the market finally absorbs the remaining distressed properties, national homes prices could again retreat.

Other Statistics

You don’t want to only look at the statistics of one group. Although different numbers are tossed out, the trend is the same from CoreLogic. Their numbers say that national average house prices increased by 6.4 percent in August, year-on-year. But that is half of the increase that occurred in the same season from 2012 to 2013.

According to Credit Suisse analysts, “The combination of higher mortgage insurance costs, higher interest rates, and higher home prices have already brought affordability back to the long-term averages for first-time home buyers.” What this implies is that first time housing costs are approaching previous highs and will further shrink the number of buyers in the market. Of course, fewer buyers in the market reduce pressures for higher prices.

Time will tell what direction housing prices will go in the near and not too distant future. Consumer confidence is generally negative towards the housing market. There could well be a drop in average prices over the next couple of years. Or there could be modest appreciation in the range of 2 to 3 percent during 2015 and 2016. What is almost certain is there will not be a major run up in prices as many analysts had previously predicted.

The improving economy and lower unemployment numbers should be driving a higher performing real estate market. However, continuing tight mortgage markets and low consumer confidence are working in the other direction. As a result, new homebuilders will remain conservative when it comes to starting new projects. The housing market is a primary driver of the national economy. Fewer new home projects likely means fewer jobs in the construction industry, which in turn will put further downward pressure on the already slow economic recovery.

Buying Real Estate - Advice That Will Keep You From Making Mistakes

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Buying a home is probably the largest purchase and investment you will ever make. Even if this isn't your first home purchase, there are a lot of opportunities out there that may be different from the last time you purchased. Use this article as a guide to understanding how you can get a great deal on a home in today's market.

To know how much you have to spend for a new home, get a real estate agent to give you an estimation of the value of your current home. You should also visit a bank and find out what kind of loan or other forms of financing you can get for a new home.

House hunters looking for a bargain ought to focus their efforts on sellers likely to be particularly motivated. Homeowners who have a specific need to make a sale in a hurry are invariably the ones most willing to drop their asking price. In order to identify such sellers, try to find properties that have been listed for a significant amount of time, or have already undergone one or more reductions in price.

Consider buying a brand-new home in the fall. In many cases builders are beginning to discount their inventory and they may even offer some great incentives around September to make the sales that they need before the end of the year. Prices of these homes that do not sell in the fall will go back up in the spring.

There are so many great deals out there right now since the crash in the housing market. As with anything, buy low and sell high. We are at record lows, so the time to buy a house has never been better. This article has shown you how you can use this economy to buy a home you will enjoy for years to come.

Avoid Real Estate Traps With These Simple Ideas

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When beginning with real estate buying, you most likely have a lot of questions floating around in your mind. You probably feel lost when looking at the documents associated with making a purchase, too. Take a look at these tips below to eliminate your confusion and to start buying smart. For buyers that have lost their home to foreclosure keep your dream alive. There may have been many reasons for losing the home such as job loss. Keep in mind that someday you will own a home again and places like Fannie Mae and Freddie Mac can give you that dream again. Just make sure that you start saving now because you might have a higher down payment because of it. To get the best price possible, ask the owner if they would accept a lower price. Be honest and open about this. Do not insist if they refuse this lower price, but make sure they know how to get in touch with you if they change their mind. When buying a home on an island, make sure you find out about flooding issues. Some areas on islands are extremely flood prone and flood whenever it so much as rains. This can be vital information if you plan to live there year-round because you don't want to be constantly flooded. Ask how often the island floods, how many evacuation routes there are and how often those routes are used. When buying, be sure to hire your own realtor and inspector. It's often tempting to use the seller's hired help to save a buck, but doing so can cost you more in the long run. The seller's agent and inspector are looking out for the best interest of the seller, and you need someone who is looking out for only you. In conclusion, buying real estate can seem a bit intimidating to someone inexperienced, but after learning and applying some of the previously mentioned tips, it's not that bad at all. It just takes a lot of research and common sense. Once you have learned what to do and avoid, you are on your way to making smarter purchases.