Making Mistakes can be costly

Making mistakes and investment real state can be costly. I had a couple from Singapore that had some flyers they had picked up in there country that had some houses that were very cheap. The flyer said that they would rent these houses out for $600 per month and net around $400 per month.

The flyer also said you could purchase these homes for $1000 – $5000 before rehab. The house on the flyer was not taken from the neighborhood they were discussing. Our team took the Singapore gentlemen to the home on the flyer. He could not believe his eyes how bad the area really was. He also had another city he was investigating at the same price that had similar results after he viewed the area.

When you’re looking at buying investment real state there are a few things you need to look at before you purchase anything. First I would look at the neighborhood and the amenities in the neighborhood that would make people want to live in that area. For example in Cleveland Heights area that we purchase properties in, shopping is plentiful and they are even building new shopping areas. They also have great restaurants and coffee houses to frequent.  The School system is also a big factor in renting or selling a house.

The second thing I would look at is the rent rates in the area your looking at. A $600 per month rental property will probably not be in the best areas if you look at the rental rates in our area the Cleveland area. We  purchase real state that rents start at $950 per month and go all the way up to $1450 per month. Think about the difference between a $600 month tenant and a $1450 month tenant? You would probably have a better quality tenant at $1450 a month then you would $600 per month.

The third thing would be equity position or the selling position you would have when the sales market returns. Generally speaking in the areas that are distressed and much cheaper people generally have to live there. You want areas where people want to live that makes it a great selling area. So let me be clear when you’re in a poor part of town people do not want to live there, but if you’re on the middle to upper middle class area people do want to live there. This makes the middle to upper middle income area much more attractive to sell.

The last part of it you need know is that in the lower income areas the tenants are not as high a quality as you the better parts of town. This usually means that your property manager and tenants will not be performing on a consistent basis. This severely limits your monthly checks and profit that you purchase the property for. We have properties in the better areas  that tenants have been in for up to four years. The reason they are there so long is because they want to live there. School systems, amenities, shopping, dining and other activities make for great tenant.

One last quick tip when you’re looking in areas to buy a property in, make sure to look at what type of stores are there. I usually like to see franchise restaurants and stores such as Walmart, Target, Macy’s, Sears etc. etc. So make sure the area you’re wanting to buy and is an area that people want to live in not that they have to live in. Brett young Valley Realty RooftopInvestment

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