Why you should become a landlord...

Over the last several weeks I’ve seen a reoccurring topic amongst Real Estate news: RENT.

So far in the last month I’ve read a handful of articles talking about the current “Rental Property Boom,” so thought it would make for a good blog.

CNN’s “Cashing in on Rental Property” article was one of the most informative that I read, and I really liked their, HOW TO FIND A GOOD DEAL section.

The meat of the article pretty much says, because of all the foreclosures that are inundating the market (see previous blogs) now is a great time to buy a rental property.

“…demand is up for rental properties and rents are rising. That's partly because foreclosures have turned more than 4 million former homeowners into renters, but also because many other prospective homeowners, worried about losing their jobs or housing prices falling a lot further still, are reluctant to buy now.”

“Many factors make this a great time to invest. Mortgage rates are at a 40-year low, and homes in many areas are ultra-cheap. Meanwhile, demand for rentals has risen in more than 500 cities, according to recent Census data. That, in turn, has enabled landlords to charge more.”

That last little sentence is the most important… “Landlords can CHARGE MORE.”

Being able to charge a renter more, means you will likely be able to get more money than what the mortgage payment is, which means POSITIVE CASH FLOW.

Here’s why… Typically banks require an INVESTOR to put down 20-25% of the loan price and prove they have enough funds to cover at least six months of the mortgage payment, taxes, and insurance… An example… A client of mine just purchased a rental property for 125K… He put 20% down, making his loan amount $100K. His monthly payment (including mortgage (PITI) and Water, Sewer & Garbage) is $800… After speaking to a local property manager he found out that the average rent in this area is $1200… That’s a POSITIVE CASH FLOW (PCF) of $400!!

I’ve found recently that an investor can have a PCF of upwards of $100.

To be honest, because I am a short-sale and foreclosure specialist and a lot of my clients are investors, the average PCF I’ve seen is around $600…

So, if you’ve ever wanted to invest in some rental property, now is certainly the time… Especially with more foreclosures expected to hit the market, and more previous homeOWNERS becoming homeRENTERS…

Some personal advice from me: I suggest finding an area you’d like to own in, then sitting down and talking to a good property management agency in THAT area… That way you can get a good idea of what your average rent would be… Then sign up with a local realtor who has access to foreclosure properties before they hit the market, this way you can get an offer in before anyone else… CNN Money also suggests, staying local…

“buying something you can get to in 10 minutes… Familiarity with the neighborhood also limits nasty surprises like a noisy bar or a nearby development competing for renters…Work with a local realtor who has experience with rentals and can help you assess how attractive a given home will be to tenants. “

Since this is MY blog, I am gonna go ahead and advertise that I would love to help you get into the rental property business. If you've been thinking about it, and have more questions just give me a call. 

916-834-7003!

Hope we can talk soon!

~ Chris