Investing in rental property gives you:
Immediate cash flow
Appreciation/equity later when sold
Tenants that pay your mortgage
Who should buy rental property? Intermediate, & Experienced Investors.
Rental property is in demand as foreclosures force homeowners back into the rental market and changes in financing requirements make it difficult for the average home buyer to qualify for funding.
While property values have fallen - rental prices have increased and they'll continue til the single family residential market stabilizes.
Investing in rental property isn't all headaches and backed up toilets when you have the right strategies, automated systems and key people in place.
Evaluate operating costs, rent amounts and cash flow.
The Rentalvaluator software shows you how your rental property will make money. It's sophisticated but easy to use. And best of all - it's Free. Perfect for investors, landlords, and agents.
Many properties qualify for tax incentive programs that keep money in your pocket. Tax abatements can help with the rehab costs, especially if you invest in neighborhoods with historical houses or inner city neighborhoods that have been economically effected.
Low Income. Look for vacant properties that are on the fringe of blighted areas and need rehab. The properties need a sound construction. These will be priced low & ready to go. Buy them, do a cosmetic rehab and rent the properties. When the cash flow and the capitalization rate is stabilized then refinance.
Always use a property management company with these types of properties.
But if you insist on managing your rental properties, check out these strategies. (They'll keep you from pulling out your hair.)
Prettier properties in better neighborhoods. Look for properties that have less than 70% occupancy and high overhead costs. Their cash flow will be low.
Create value & turn that property around with cosmetic upgrades. Increase occupancy to 95%. Cut costs by 15% and add a property management company. Then sell the property off to another investor as a turn key operation. These properties will give you the best ROI.
Beautiful Properties in the best area. Look for properties that produce a capitalization rate of 15% or better. With an established property management team and long term tenants.
Always mortgage the property.
Use other people's money, (OPM) and government funding.
Get the equity out of rental property with a "cash out" loan. It's just a low interest loan to access to your equity. The money from the loan is tax free and you'll be able to write off the interest. And if you hold the property for long term, you'll have the opportunity to "cash out the equity" every 4-5 years. Plus the loan will add an extra layer of asset protection to the property.
The Tax Benefits of investing in rental property may not put money directly into your pocket but it can help keep the IRS from taking it out. If your business
Corporation is structured correctly, each year you'll have write offs of
deductible expenses. These expenses are anything related to the operation of the
rental property plus a depreciation allowance.
If the property is sold, eliminate taxes on capital gains with a 1031 tax-free exchange or defer taxes by investing through an IRA.
Multi Layer Strategy. Many investors only buy single family homes as rentals.
These investors rent the properties to tenants with a rent to own lease and option contracts, usually for 2 years. During this time, the tenants clean up their credit score and save the money needed for the down payment and closing. The investor then sells the rental property to the tenant.
And if the tenants meet the criteria, the landlord has the ability to offer owner financing. Using a wrap around mortgage strategy, the investor can create a new stream of income from a cash flow note. Even if the Landlord has a mortgage on the rental property.
Investing in rental property, offers many alternatives for creating cash flow and long term wealth. Start building your portfolio today and secure your financial future.