Factors for Investing in SFH for rental Income

[Chinmay Goswami]

What are various factors that are considered while buying a rental property at todays price points to justify the investment? 2% rule was good for during the last few years, their is continuous downward pressure on the margin? Any suggestions will be deeply appreciated

[Justin Fox]

You don't buy at market value or anywhere near it.  You wait for the good deals.  You find people who are delinquent on taxes and the property looks distressed.  Most times the cost to get it up to stuff for financing would take them too much money and they can't afford the 10k+ cash to pay backed taxes.  Tell them I can pay your taxes and give you a little money or owner finance at a deal rate, or you can just wait and have another investor buy your property come May 3rd and you get nothing but an eviction.  I would be a little more tactful, but get the point across.

You fix it up and either month to month for 6 months and refinance or immediately put on the market to sell for a profit (hopefully).

You can also get a contractor for new construction and build a rental-grade smaller home in a nice area that will appraise between 30 and 45% more than what the cost was.  Rent that bad boy out and cash out 6 months down the road (with some extra money in your pocket) and do it again or something completely different.

Keep track of the vendors you've written checks to, the process and order of operation and then attempt to do it yourself after the 2nd or 3rd build.  Will save you ~12/15% of the build cost.

If you buy an older home (5-8 years and older) get a frickin' warranty.  You can't beat a new AC system for 188 dollars.  Or a new cooktop for 75 or getting paid 70 dollars for the fridge's water freezing up.  I've paid ~1,400 in premiums and service call fees for the past 2 years and have received 5,142.00 in goods and services.  I don't know when they'll go bankrupt, but I'll be a 'paying' customer until then.