Investment Property For Sale In The USA
Finding profitable investment property for sale in the USA can be tricky if you don’t know where to look.
With over 47 Types of Investment Properties in the USA available–Which Should You Buy?
Foreign investors are not limited by the range of commercial and residential projects ripe for investment or development.
In the US, there are no free zone restrictions, and the land is title is freehold.
Investing in real estate has never been easier with the abundance of inexpensive
• residential property
• investment homes
• commercial property
• bank-owned properties
• foreclosure properties
You can easily buy these from County Tax Auctions, Foreclosures, and Wholesaling.
Why Real Estate Investing?
Property Investment could garner a more stable income than stock market investing; it’s not for everyone.
Real estate investing involves much more work than stock investing and isn’t entirely passive for someone who wants to rent their investments to tenants.
People need to invest in things they understand.
If you are going to invest in real estate, you need to know your numbers, and you need to understand that this is not a get rich fast investment.
Two types of people invest in real estate.
1. People who want to own tangible investments
2. People good with research and customer service
Own Tangible Investments
Most people prefer real estate as an investment, as assets are tangible.
Not everyone can stomach volatility or the stress a day trader goes through.
Although real estate investments require hands-on work, the property can provide month-to-month cash flow if you rent it out.
Getting paid monthly as a landlord is much more tangible than money sitting in an investment account.
Love Research and People Management?
People think that real estate investing is passive; the truth is if you will do customer service coupled with in-depth research, only then should you work in real estate.
You need to know your numbers, and you need to understand people.
Being a landlord is more akin to working in customer service than being an investor.
Realistically, dealing with tenants at all hours is a daily routine for landlords.
Successes and failures come down to the amount of research and planning.
Knowing the laws and how to work with people are both critical qualities for anyone who wants to invest in real estate.
Why Invest In Real Estate In The USA?
In the United States, the real estate market has always provided foreign investors with a stable and welcoming market.
As a place to do business, the United States offers a predictable and transparent legal system, low taxes, outstanding infrastructure, and access to the world’s most lucrative consumer market.
5 Reasons We Choose Investment Property For Sale in the USA
• Market Size and abundance of inventories
• Much more affordable than local markets
• Ease of Acquisition
• Land Ownership
• Price to Value Ratio
Although some real estate investors have misgivings because of increased interest rates, stagnant or dropping equity prices, millionaires say real estate is still the best investment you can make today.
What is an Investment Property?
Investment property is a real estate property that you buy to earn a return on the investment through rental income, the future resale of the property, or both.
An individual investor, a group of investors, or a corporation may hold the property.
You can rent out the property and become a “landlord” and earn a rental income or resell the house after completing some repairs or rehab (remodelling).
Alternatively, you could do both by renting the property for some time and reselling it later.
Why Do We Buy In The USA?
Noble Sky International has acquired over 50 properties in the US in the following states.
• New York
• South Carolina
Where Can You Find Investment Properties For Sale?
When you buy investment property for sale as an investor, your goal is to keep making money out of it regardless of the strategy.
When a homeowner buys a home, his/her goal is to live in it.
To find investment properties for sale, look for;
Noble Sky International has the Unique Real Estate Investing Model to guide property investors to invest solely in safe real estate investments, producing quick profits.
What Makes Good Investment Property To Buy?
The right investment property is likely to deliver greater future returns that exceed ordinary income.
Some key considerations we recommend you take to capitalize on achieving are:
- A good or above-average rental return
- Capital growth
When we research for an investment property, we aim to secure a property in continuous demand by tenants and future home buyers.
10 Reasons To Choose Investment Property For Sale in the USA?
There are many benefits for you if you plan to invest in property in the United States.
The ten major reasons you should buy an investment property for sale in the USA are:
1. Higher Returns on Investment
2. Stable Economy
4. Fix and flip properties
5. No need for residency
6. Market Size and abundance of inventories
7. Much more affordable than local markets
8. Ease of Acquisition
9. Land Ownership
10. Price to Value Ratio
Location and Equity Gain of Investment Property For Sale
The value of the real estate or equity gains improves over time, as long as you choose the right property type and in the right locations.
Overall, the United States economy performs well, with Americans continually searching for new growth opportunities in personal and professional matters.
For investors looking to invest in a budget, there is plenty of buys residential property—an excellent choice for investors who want the best returns on their investment.
Suppose you would prefer a steady source of passive income for the long term, apart from investing in a single-family home.
In that case, you could invest in apartment complexes and even dormitories in selected cities.
Each type of investment requires different budgetary considerations.
If you have a bigger budget, you could purchase plenty of premium asset options to lease out shopping complexes, retail spaces, office buildings, and similar establishments.
For selecting the property’s location, California is an iconic city with famous landmarks where the celebrities, rich and famous converge.
Beverly Hills is one of the priciest neighborhoods in the Los Angeles area.
While buying cash can eliminate your closing costs since it doesn’t involve any lender, Beverly Hills is the third most expensive place to work and live.
According to Zillow, typically, the median home value of properties in Beverly Hills is $3,697,253.
The values are seasonally adjusted, with many properties having price tags far exceeding US$4 Million.
Beverly Hills home values have gone up 7.7% over the past year.
Finding A Profitable Investment Property
Finding profitable investment property for sale in the USA is, first and foremost, finding the right location.
Tenants not only want to work and live in a vibrant city with beautiful beaches and parks.
Residents look for affordable housing or rental properties, which makes the right choice for investors.
Cities such as Los Angeles, San Diego, and San Francisco are prime investment destinations.
If you want to be assured of good returns on investment but don’t have the big bucks to buy into the area – you can find many properties that fetch good rental income in some smaller cities.
Fix and Flip Investment Properties For Sale
Fix, and Flip properties can help you maximize profit on your investment if you can buy cash.
For this strategy to work, you need to locate a property you could purchase within your budget.
By saving money on the purchase, and without a bank loan or monthly mortgage, you need to consider:
• how you want to spend on the renovation
• how quickly you can sell the property
• reducing the average turnaround time per project
Setting Up Your Business Structure
As an overseas investor, if you plan to invest in the United States, you need to set up your business structure.
Noble Sky International can support you with our professional service, so you do not travel to the United States every time you require inspecting the property.
• Identify the target properties
• Verify the property location and condition
• taxation laws and tax restructuring
You can still hire people to support you with other types of paperwork, such as opening a bank account in the United States.
For overseas investors, learning more about the investment options in the U.S. will take time if you did this on your own from Asia.
If you wish to know how you can do this with a property management company’s help, you can contact Noble Sky International here to learn more through our online webinars.
Purchasing An Investment Property To Earn Rental Income
For rental properties, living in a different time zone can be a nightmare.
You don’t have to live in the U.S. to own and rent out a property in the country.
Thanks to using a team in the U.S. with experienced property managers to take care of the property on your behalf—there is no limit to the properties you can invest in.
You can own:
- apartment buildings
- retail outlets
- office buildings
- commercial properties
and even hotels if you are not living in the United States.
The property manager’s role is to look after the building and collect the rent for your monthly cash flow on your behalf.
Property managers will report the earnings to the local tax authorities and pay the tax for rental income.
How Noble Sky Strategies to Get Investment Property For Sale in the USA?
Most Asian investors are familiar with the traditional method of buying their properties.
Many use a 20% down payment with an 80% bank loan to buy their property.
Noble Sky capitalizes on finding property below market value.
Comparison of Investment Property For Sale in Asia and USA – Gross Yield Rental Income
When Do You Invest? How Do You Time The Market?
“Time in the market, not timing the market.”
Don’t let your emotions affect your investment or try to time the market.
Many investors think they can time the market and buy properties when it hits rock bottom – scoop up all spoils; and sell it for the highest price to make the most profit.
The better way to invest is to do with a sound strategy and an exit plan.
Time in the market is essential.
Your money can do most of the work to help you retire in comfort if you save and start investing consistently.
You let the earnings of an investment compound, including keeping the property, renting it out, and selling it off when you make an excellent profit to reinvest.
Fundamentals to measure are population growth, supply and demand, employment levels, interest rates, affordability, and inflationary pressures.
However, when property markets are booming, people want to jump on, often when the market is near its peak.
What Is a Trough?
In economic terms, a trough can refer to a stage in the business cycle where the activity is bottoming or bottoming prices before a rise.
The Right Stage Of The Investment Property Cycle
As an investor, it is vital to understand that the property market moves in cycles.
A property cycle is a progression of repeated situations presented in the demographic, economic, and emotional factors that affect supply and demand for property, subsequently influencing the property market.
If you keep in mind that property values rise or fall during certain phases of the cycle, you can strategize before making your first move.
The key to any investment model has three main phases.
- The Boom (Strong Growth)—Property Prices Surge
- The Upturn (Expansion & Growth)—Property Prices Climb
- The Slump (Declining Market)—Property Prices Fall
The Boom phase is the sellers’ market with properties sold above their asking price as buyers outbid each other.
Although it lasts for a short period, the boom phase is when rent and home prices hike.
During this phase, developers play catch up and build quickly to establish a new housing supply.
The oversupply creates an excess in the market and dampens the boom phase. When this happens, the property market will eventually slump.
The Slump phase comes down to supply and demand–oversupply causes vacancy rates to go up, and rental figures gradually deteriorate.
The slump phase is challenging for new home buyers.
They will struggle to pay their monthly mortgage owing to higher interest rates.
Typically, the slump phase is the most extended period in the cycle.
Sellers find it more challenging to sell as property prices stagnate and remain flat for an extended period.
Buyer sentiment becomes less enthusiastic as access to financing becomes more difficult.
The Upturn occurs when the economy crashes to such a low point in growth that recovery can emerge.
When the trough of the cycle is reached, and prices and rents climb up again.
Properties are affordable, and the returns become lucrative.
As the upturn phase reaches its peak, investors and first home buyers will gain a powerful interest in pushing the housing market into another boom phase.
Understanding The Investment Property Cycle
As a foreign investor from Singapore or Asia, it is crucial to understand the property cycle when buying to ensure you secure your property at the right price.
No matter which part of the world you are from – most investors want to acquire properties way below the fair market valuation and sell high.
However, it is challenging to buy the best property at falling prices, hold the parcel and wait for the next surge to sell it at a premium.
Some buyers even ask, “How will I know if the property has reached rock-bottom prices?”
I frequently tell my client that’s like saying, “I want to hit the jackpot or win the lottery.”
Getting the ideal investment property for an investor is not gambling.
Let me share with you how our analysis evaluates several factors.
The Right of Property Investment Location
Location is one of the most important things to consider when I test a potential investment property.
When buying property, you probably heard this real estate agent’s mantra: Location, location, location repeated repeatedly.
In a nutshell, this means a property’s value increases or decreases because of its location. Location is integral to gaining the right investment property.
No matter how cheap the property is. No matter how appealing the potential investment property is, it still boils down to its location.
- Where is this gem of a dream home located?
- On the outskirts?
- Is the nearest house next to the property is 10 miles away?
- Would you want to live there yourself?
When I ask myself these questions, I can see the strategies about the property’s potential to a new purchaser or how it will appreciate over the years.
Location Amenities For Work, Study, And Play
If we choose the location correctly, it means the property is desirable and suitable – somewhere people live, work, or study and play.
I often say the best gauge is to think of the tenant or buyer as someone searching for the best place to live, given their financial circumstances.
The closeness of your property’s location to nearby amenities is an important concern to tenants.
- Public transportation
- Public facilities (libraries, parks)
- Markets & Shops
Properties Near A Community College
Real estate guru Robert Kiyosaki regularly talks about the benefits of buying a cash-generating house near a college community.
The reasoning is simple.
- The desirability of the area
- Increased demand for apartments
- A ready supply of tenants
- A higher rent
- Parents Pay Rent
Some of the best properties to buy are in the cities that are experiencing positive population growth.
As the community expands, the infrastructure upgrades and the life quality of a city rises.
While it may attract you to homes in the established suburbs, what I do is spend some time looking for emerging suburbs with strong growth potential.
Last, remember that everyone prefers to live near a major city (within 10 KM).
The densest places in the world are still the most pricey places to purchase a home.
The Right Investment Property
Finding the right tenant for your rental property is fundamental to business success for landlords and property professionals.
One fundamental consideration when you are determining an investment property is to identify your target tenants’ demographics.
Wide-ranging factors should also come into play when thinking about what you want from the tenancy or lease arrangement to safeguarding your property.
- marital status
- long-term goals
The Four Types of Market Segmentation
Within each of these types of market segmentation, multiple sub-categories further classify the target tenants.
As a rule of thumb, we would want to ensure that property appeal to at least two market segments.
For instance, if you are looking to invest near a university, you would want to invest in apartments instead of a single-family home.
For investments in an older community, look for a single-family home with a simple, practical layout that appeals more to elderly tenants.
Before selecting a property, some questions you want to ask are:
“Would someone in the demographics of my target tenants want to live in this house?”
If the answer is yes, then you have picked the right investment property to purchase.
When you know the rental demographic, it will benefit your property investment selections in the long run.
The Right Returns
When purchasing a home, about 90% of property investors make the crucial mistake of choosing a property based on emotion.
90% of property investors make the crucial mistake of choosing a property based on emotions.
Remember, this home is an asset to generate rental income for you.
The property need not fit your requirements for a home you want to live in yourself.
I was a newbie once. Rather than finances and logic, I also select the wrong property for my first investment endeavours as a newbie.
You don’t want to risk a wrong purchase that results in capital growth below the market average.
The rental income did not cover my monthly mortgage and maintenance cost.
The worst experience was the property I owned couldn’t rent out or sell that property for years.
It is, therefore, vital to do your research to establish your strategy before investing.
Researching The Property Market
The ideal property can make or break your fate as property investors.
If you haven’t jumped aboard the real estate train, you’re in an excellent place.
You will need the know-how to understand the market before kick-start your property investment portfolio.
You start your research based on the human factor instead of just thinking of houses to buy or how high you stand to profit from the properties’ rental or sale.
For example, read the newspaper’s business news for big companies’ information and note their expansion or relocation plans.
New factories under construction mean more new job opportunities, and people migrating to the city.
People will move there where there are new jobs, which can skyrocket the location’s desirability.
Perhaps it’s a new highway that connects to a major city or even an underpass that halves the travelling time.
These will affect population growth and even migration. In summary, when you look at the “desired” housing needs of these groups of people, you will have a better idea of what the market wants.
- Young Families
- Single Working Adults
- Middle Class
What is the best investment property to buy?
Often investors shift through every available property type to discover which will make them the biggest profit.
Types of Real Estate Investments
Each type of real estate investment come with unique advantages and disadvantages that investors should evaluate carefully before taking the plunge.
The options available:
- Residential Real Estate
- Commercial Real Estate
- Raw Land & New Construction
- Real Estate Investment Trusts (REITs)
- Crowdfunding Platforms
Residential Real Estate
While there are numerous rental property types in residential real estate, the most common and profitable are single-family homes.
Other residential properties include duplexes, multifamily properties, and vacation homes.
Residential real estate is the ideal vehicle for many investors as it is easier to turn profits quickly and consistently for both Flips and Rental Income.
Choosing the right market and the exit strategy is key when it comes to residential real estate.
The most common exit strategies for residential real estate include
· buy and hold properties (to generate rental income)
Noble Sky assists Investors on the best strategies that work in their market area by conducting a thorough market analysis.
When managed correctly, a residential real estate investment can yield handsome profits -you earn a steady cash flow and benefit from many tax breaks.
Commercial Real Estate
The best commercial properties to invest in include
- Multifamily projects.
Investors who opt for commercial properties may find higher income potential, longer leases, and lower vacancy rates than other forms of real estate.
Investing in commercial real estate supports local communities and has the potential for higher cash flow.
There is less competition in commercial real estate as it is a larger undertaking than investing in residential homes.
Vacant Land Investing, Property Development and New Construction
The land is the most illiquid form of real estate that can diversify an investor’s portfolio.
Raw land or vacant land investing and new construction as a developer represent two different real estate investments.
If you want to diversify your investor’s portfolio, many deals are available.
In areas where there is projected growth, new construction is where people want to invest.
It is not simply investing in a new city or suburb with projected earnings.
The fresh development must have ready industries and jobs to support growth.
Vacant land available for purchase at a low, low price is most attractive – but if there is no infrastructure, no highway nearby, then people might not want to live there.
Is it near popular and rapidly growing markets?
If you are looking at Florida, then there is no shortage of condominiums launches.
But if you are looking at three of the most inexpensive places where you can buy (dirt cheap) land, Tennessee, Arkansas, West Virginia come to mind.
If you plan to purchase land there, make sure it’s close to water and utilities, and there are road and a town nearby!
While many investors may be unfamiliar with vacant land and new construction investing, – these strategies often represent investors’ attractive profits.
Whether you are interested in; vacant land provides a unique opportunity for real estate investors to
- developing a property from start to finish or
- profiting from a long-term buy and hold
Investors must be prepared to conduct extensive market research to maximize profits.
Choosing a desirable area prevents investment from being hampered by market factors.
Real Estate Investment Trusts (REITs)
Real estate investment trusts (REITs) are companies that own different commercial real estate types.
List of the REITs include
While you don’t directly own the buildings or co-joint as an owner, what you invest in are in the shares of these real estate companies on the stock exchange.
When you invest in a REIT, you invest in the properties these companies own – without the added risk of owning the property yourself.
Investors receive dividends from the REITs companies – about 90% of their taxable income to shareholders every year.
Publicly traded REITs offer more flexible liquidity in contrast to other types of real estate investments.
Your shares of the company on the stock exchange can be sold immediately when you need emergency funds.
Real Estate Crowdfunding Platforms
Real-estate crowdfunding or property crowdfunding is a way of raising money for real estate investment by getting a pool of investors to contribute a small amount of money towards a project.
In a nutshell, it is raising funds that allow small real estate investors to fund extensive projects.
Raising money is conducted via an online crowdfunding platform (the investor/lender) to invest capital for high returns on the investment.
Traditionally reserved for the wealthy, crowdfunding platforms offer small investors access to property projects that offer high returns – which also introduces a high risk.
Remember, they typically limit crowdfunding platforms to accredited investors – those with a high net worth.
Some sites offer access to non-accredited investors as well.
* accredited investor, an individual or entity must meet certain income and net worth guidelines.
Typically, to be an accredited investor, a person must have an annual income exceeding $200,000 ($300,000 for joint income) for the last two years with the expectation of earning the same or a higher income in the current year.
Where To Find Investment Property For Sale In The USA?
Many investors get so caught up in identifying a property type and location that they don’t start investing.
Some want to buy in certain areas because of nostalgia, nearby family or where they work.
What is more important is finding a property that others want to live in – either they buy or rent from you?
There are many ways to find good real estate in the US.
Be sure to go through the list to learn more.
Here are a few options investors may find useful:
Multiple listing service (MLS Listings) & FSBOs
Many investors find properties on the MLS or through for sale by owner (FSBO) listing.
Some of these properties suffer from poor or non-existent marketing, while they overprice others when listed.
Hence, these properties receive no attention from buyers.
If you are willing to sort, the MLS can find various investment opportunities at different prices.
While you may not access the MLS directly, investors can team up with a real estate agent or be willing to work with one.
Having a good real estate agent is a boon as it alerts them of new listings in their target area.
Your next step if to attend the local networking or real estate event.
Investors can drive through their target areas, looking for sale signs to find these properties.
Sometimes when you see a vacant property, you can also write a letter to the owner to state your intent to purchase.
Remember, identifying properties can take time – finding a gem is a time-consuming exercise.
I know savvy investors who employ multiple angles to secure their next deal.
Off-market properties are not impossible to find -investors just need to know how and where to search.
For investors looking for off-market properties, there are a few resources worth checking out first.
- public records
- real estate auctions,
- networking events
Each of these sources represents a unique opportunity to find hidden properties in an area.
For example, wholesalers often know properties available at reasonable prices. It could be a quick sale, a cash sale or from a motivated seller willing to make a capital loss.
Normally these are not distressed properties but good properties that are freshly rehabbed and maybe already leased — and may even come with an existing property management company.
In every county, every city and state, there are foreclosures.
Someone lost their job, got divorced, or someone died.
In 2020, there was a huge spike in backlogged foreclosures as many employees are laid off or have moved away from the city back home to the county.
With years of backlogged foreclosures and increased motivation for banks to repossess -there could be more foreclosures up for grabs in the coming months.
What Is The Best Type Of Investment Property For Sale In The USA?
What is best for one investor may not be suitable for another?
While many investors want a direct, straightforward answer, determining the best type of investment property is actually a subjective process.
Typically, it will depend on the following
- individual circumstances
- market area
- investing strategy
Choosing the right property type boils down to weighing each option’s pros and cons.
Investors need to keep in mind a few key factors as they seek the best choice for themselves.
You may ask about Investment Property For Sale in the USA and the best type of real estate – however, Location plays a huge role in attracting buyers and keeping tenants.
Investors should note their own preferred level of involvement, risk tolerance, and profitability for investing besides location.
Investors interested in residential properties may be interested in more “mature” markets than speculative “up-and-coming” markets.
While you may find success with vacant land or new construction, these are long term projects which may involve hiccups along the way.
Larger and long-term projects take months or even years to finish.
Those hoping to take on a more active hands-on role may find developing vacant land or rehabbing residential homes to be more fulfilling.
As you choose the best type of investment property to be involved in, keep in mind that different investors find success in investing in various property types.
If you are a newbie just getting your feet wet for the first time, familiarize yourself with residential real estate before graduating from commercial properties.
You can, over time, choose to diversify by investing in multiple property types.
Is Buying An Investment Property Right For You?
At Noble Sky International, we believe that getting the best price for your investment dollar is important and in the shortest time possible.
Since 2014, we have helped our investors to gain foreclosure properties for sale and real estate for sale nationwide from the first day.
We get you the best price when you gain the property, and when you sell an investment property with professionalism and exclusive, proven marketing tools.
Let’s look at these six tips.
Even before you think of buying your first investment property, you will need to do your homework about the city’s rental market.
You should know many things and the risks to the property before purchasing a new home – from the garage to the A/C unit to the toilet bowls.
You need to look at the local data;
- vacancy rates
- average rents and price for
- one-bedroom or two-bedroom apartments
- a desirable location
For some real estate investors, getting a duplex while the second unit’s rent may help offset their expenses.
Property Price Appreciation
US real estate might attract some potential investors to certain properties because of home price appreciation.
However, market appreciation isn’t something within the investor’s control.
Instead, investors who have bought investment properties with Noble Sky International focus more on equality gain for the property when they invest!
While the capitalization rate (cap rate) helps you determine a property’s rate of return – the calculation involves dividing a property’s annual net income annual rent minus any expenses by a home’s value.
Do the math with no emotion and aim for a cap rate of about 5%.
How To test Potential Investment Property For Rental?
As a responsible investor, you want to know the property’s cash flow before investing.
For quick apples to apple comparison, you want to know if you can get the full potential for a property if you buy 100% CASH.
A good rule of thumb is to multiply the gross rent for the year by 55%.
Approximately 45% of the gross rent will go toward vacancies, insurance, maintenance.
Are You Cut out to Be a Landlord?
Property owners who have one or two properties often do their own repairs to try to save money.
Not many Landlords know their way around a toolbox or would appreciate being called in the middle of the night to unclog a toilet.
You may think that hiring a property manager will eat into your profits – but if you are not a handyperson, wouldn’t you rather pay a small fee for someone else to make it work?
Professional property manager put together a solid team of cleaners, handypersons, and contractors to get your rental property up to speed.
For new investors, if you’re not the handy type and don’t want to pay someone to do the running around, being a landlord may not be the right thing for you.
Being a landlord is not for everyone.
Age Of The Investment Property
Newer properties have fewer maintenance issues.
You will need to make substantial repairs for older properties like changing a leaking roof, rewire, changing the plumbing, put in a modern bathroom, or even heating systems.
Evaluate What Repairs Are Necessary
A general rule of thumb is repairing will always cost higher than your budget.
Most fix and flip television shows like to overstate the profits and understate the expenses.
In reality, you will need an experienced contractor to complete the repairs within budget and on time for buildings to be turned into homes.
The cost of repairs will differ depending on whether you can manage it yourself or hire sub-contractors for the job.
I would strongly advocate that you don’t repair the house yourself unless, of course, you are a resident builder yourself.
You need to call in the experts for the remodelling works.
Getting down to the nitty-gritty of choosing material, fixtures, or colour schemes and coordinating with the sub-contractors can overwhelm!
I wished quietly to myself if only at appointed the day, date, and time, everything magically complete, and I walk in with my family and our suitcases!
Working With A Competent Contractor
Noble Sky works with a local contractor to get a reasonable, competitive quotation for the repairs.
He shortlists reliable sub-contractors and liaises with them to get the job done to meet our requirements.
When working with an unknown contractor in a new city, it takes a long time to tie him down to a firm timeline.
It may take more than a month to close the deal.
During winter months, rehabs or repairs can challenge as workers can only work inside the house.
Newbie investors often ask why there are very few to almost no transactions in winter.
It is tough to secure any serious offers above our asking price in the middle of winter.
Tips: Get a reliable local contractor with a fixed crew to carry out the repairs during the colder months.
Complete the project in time for spring, and you get to resell the home at a premium price.
Timing Is Of The Essence
If you’re like me, you will want to get top dollar for your property in the shortest time possible.
The best-case scenario is being able to flip a home in about four months.
Suppose your contractor takes longer, say beyond six months.
In that case, you will need to pay other “soft costs” – property taxes and insurance on the vacant property while they carry any other additional repairs required by the city inspectors.
Sometimes other unexpected repairs expenses can escalate the costs.
For example, you may plan to remove drywall to make the kitchen and dining area more spacious.
American homes have drywall in them, regardless of their structure.
The paper in drywall and sheetrock is cellulose, a favourite termites food.
Lo-and-behold, you find an infestation of termites.
You have no choice but to pay an exterminator to get rid of the termites and possibly spend more money to re-frame any other affected walls.
Always assume you will have to hold on to a property longer – extra time than you believe you will.
Because of this, we prefer to work only with a reliable, experienced contractor who knows the local market and conditions accurately.
What Makes A Bad Investment Properties?
When you test a potential investment property, it is more than the list price that determines if it makes a profitable investment.
You will need to be aware of the local area’s market average rent for:
- traditional long-term rentals
- shorter Airbnb rentals
- vacation rentals
- vacancy rate
- cost of property maintenance
All these factors will play a role in the marketability of a property and the regular income you will collect on the investment.
If we see any red flags concerning these factors, we know the property will be a bad real estate investment.
Let’s inspect each criterion to determine what to look for when testing potential investment properties.
These are the top four things to consider when evaluating a potential rental property are:
Age Of The Investment Property
A house erected before 1980 has banned lead paint and asbestos.
These chemicals might affect the occupants’ health, and you need to replace these elements.
I like where I live because of the community and the good neighbours I have – this is universal to a great extent.
To find out if you’re buying into a pleasant neighbourhood, some questions you will want to ask yourself are:
- Is this a safe neighbourhood?
- Who are the people who live here?
- Is the neighbourhood safe?
- What type of tenants will want to live in this neighbourhood?
- Is the community stable, expanding, or in decline?
- Is there an abundance of vacant properties, or is there an area with newly constructed properties?
Is Your Neighbor A Good Neighbor?
Bad neighbours can bring down a rental house’s marketability, creating a challenge to maintain tenancy and occupancy.
It is tough to sell the world’s most beautiful, reasonably priced rental property if the neighbours are terrible.
We believe that having boots on the ground to visit the neighbourhood at different times of the day helps make the best decisions to buy or not to buy.
Some things you want to look out for are neighbourhood eyesores like piles of trash, cluttered yards, abandoned cars, and unkempt gardens.
Listen out for loud music, audible arguments, power tools, and garage band practice.
The biggest culprit is barking dogs.
Not that we hate dogs, but can you imagine what others have to go through if the barking continues late into the night?
Most homeowners need to spend 1% to 2% of their home’s purchase price every year for routine maintenance replacement and roofing repair.
Maintenance and repair are some most challenging expenses to estimate when performing your ROI analysis on a potential rental property.
No two properties are the same.
I usually have this assessment by an experienced local contractor.
The cost of these big-ticket items requires additional charge and will affect my bottom line.
The Big-Ticket Items
The Roof—Automatically add another $10,000-$20,000 to your purchase price for a primary roof replacement.
Water Damage—Visible old or recurring water damage is probably just the tip of the iceberg of more damage hidden out of sight that will regularly cost until you fix the issue.
Exterior Paint—A visual inspection of the house’s surface can reveal damage or decay from peeling exterior paint.
The Garden Around The House
When I view a new property, I consider how many trees are on the property and the house’s proximity.
Older, bigger trees have longer and bigger root systems, and trees planted in the middle of the yard, closer to the structure, can pose an enormous problem.
Tree roots cause the most costly complications as these lead to problems that cost thousands of dollars to investigate and rectify.
Occasionally, roots find their way through existing cracks and enlarge them and even crack driveways.
Remedies are expensive and involve cutting down the tree. Remove the root system so that you can make a smooth, level surface again.
These damages can cause cracks affecting the;
outdoor sewer lines
- underground utilities
- perimeter fences
- sidewalks and pavement
- home’s foundation
Working With A Property Manager To Handle Tenants
A property manager’s responsibilities, among many other tasks, includes
- supervising work orders
- coordinating building maintenance
- doing light handyman
- cleaning work,
- resolving tenant complaints,
- marketing rentals
- finding tenants
- showing and leasing vacant units
- collecting and depositing rent
- communicating regularly with the owner
The most important responsibility is to get competitive prices for the maximum profit on the property that covers taxes and overhead.
You should consider hiring a property management company if you have several properties or rental units.
The more rental properties you own, the more you will benefit from a management company.
You don’t live near your rental property.
Hiring professional property management is worth the money for Airbnb owners.
A property manager’s experience handling the business aspect of a rental and managing tenants is invaluable.
Cash Flow For Your Investment Property
In real estate, cash flow is the difference between a property’s income and expenses, including the debts.
Most real estate investors aim at owning a rental property with positive cash flow.
The more cash flow a property has, the better the return and the more income the real estate investor earns.
Capital Gains Tax/ Personal Taxes
Short-term capital gains happen when you sell an investment property you hold for one year or less.
These gains are taxed as ordinary income, which means you pay the same personal tax rate as you would on wages from your job.
By setting your investment property as a business entity, an LLC, you pay corporate taxes instead of personal income tax.
The properties you own become an inventory instead of assets.
Mitigate Risks For Investment Properties
Investing involves risks and rewards.
As you aim to achieve higher returns, the greater the potential for significant gains and possible losses.
For investors, buying physical property is more tangible than buying, say, Bitcoins.
A building gives many investors a level of comfort.
Yet, there are many risks involved in commercial real estate investing when evaluating a new property’s potential returns.
You may want to consider these risk factors when evaluating any private real estate investment.
General Market Risk.
Property sales outlook and the real estate market are tied to the economy, interest rates, and the effects of COVID-19, which impacted people working from home.
Investors can’t eliminate market shocks, the surging demand for liquidity and a sudden stop to global travel.
In real estate investing, there’s always a demand for single-family homes in good and bad economies.
While residential real estate is considered low-risk and often yields lower returns, other seasonal stays for business and tourism travel pose a higher risk than apartments and homes.
The more risk, the higher the returns.
While developing a vacant piece of land from the ground up into a commercially viable project may make you a 500% profit, investors take on more risk types than just the construction risk.
There’s the risk of non-approval from government agencies, environmental issues, budget overruns, workers strikes and 101 other risks about construction and services connection.
Some real estate markets make it easy to get into the investment but difficult to get out of.
You could buy a dirt-cheap property, rehab and put it on the market, expecting dozens of prospective buyers to show up – and have no offers.
Or you could have your buyers applying for a bank loan turned down.
Liquidity is not something that no one can guarantee.
For commercial property, landlords were always happy to have Sears, Kmart and J.C. Penney anchor their malls.
In the wake of the coronavirus crisis, J.C.Penney Company, Inc filed for Chapter 11 bankruptcy.
More than 100 Sears and Kmart stores are in their final days.
Replacement cost risk.
The million-dollar condominium that you purchase today may be obsolete in 15 years.
New buildings are going up with better facilities and comparable rents compared to higher leases in older properties.
It is only a matter of time before rental rates justify new construction and increase supply risk.
In a catch 22 situation, it may not be possible to raise rents or maintain occupancy in the older building with new competition in the form of newly built high rises.
Whatever is state of the art today will be obsolete in the next decade.
Leverage is a force multiplier – with more debt on an investment, the riskier it is, the more investors should demand in return.
If a project’s loans are under stress – and if its return on assets isn’t enough to cover interest payments – investors tend to lose a lot quickly.
Bottom line: real estate investors should be conversant about these risks and receive straight answers to be more confident in making their investing decisions.
There are many Type Of Investment Property For Sale in the USA that can yield high-profit margins for investors willing to put in the work.
Due to the wide variety of options available, yes, there are 47 Types of Investment Properties in the USA!
Many investors likely find themselves wondering what really is the best type of property to invest in.
Real estate and Investment Property For Sale in the USA are all about the numbers.
If the numbers make little sense, walk away and wait for the next opportunity.
While there are several ROI calculators out there to help you do the math, these are additional big-ticket items that can only be assessed with the expertise of an experienced local contractor.
Noble Sky International are real estate experts who can deal with real data property analysis to determine the return on an investment property and choose a profitable one.
We are a professional institute and will benefit you by working with many other investors in multiple USA locations.