How To Find Good Investment Property

Sloppy · 10-26-2004, 05:32 AM

The idea of owning rental real estate seems to be gaining popularity as investors tire of the swoops and swoons of the stock market. As I pointed out in a separate column, not everyone has what it takes to be a landlord. But those who do may find rentals to be a good way to build wealth.

Once you’ve made the decision to buy rental property, your real work begins. Finding a profitable rental property usually takes time, connections and plenty of research.

Here’s what you need to know to get started:
now your time horizon
As with any other investment, you should have a good idea how long you plan to own a rental property before you buy it, says Robert Cain, publisher of the Rental Property Reporter newsletter.

The longer you plan to own the property, the more you’ll probably need to invest in maintenance, repairs and improvements, Cain said.

“If you’re keeping it for 20 years, at some point you’re going to be putting a new roof on that property. You’re going to be putting in new appliances and doing some major repairs,” Cain said. If you’re only planning to own a property for five years, by contrast, you’ll probably want to avoid making any major improvements unless you’re sure you can recoup the cost with a higher sale price.

You also may face more investment risk with a shorter time horizon. Although your rental will almost certainly appreciate over 20 years, it could easily lose value in the next five, particularly if you’re buying in an overheated market. You’ll need a bigger potential annual return to make up for that risk.

For many small investors, long-term ownership makes the most sense, said Pat Callahan, an attorney, landlord and founder of the American Association of Small Property Owners. You’ll have plenty of time to ride out any swings in the market, and rental income can make a nice supplement to your day job. Find enough rental properties, and being a landlord may become your day job.

Develop a network
Experienced landlords find their properties in a variety of ways. Some hunt for foreclosures, making friends with city hall clerks or bank employees who know which properties are about to be sold. Some run ads in local newspapers. Others work with real estate agents who keep their eyes peeled for possible buys.

Several landlords recommended joining a local landlord or property owner's association to make contacts. Callahan’s Web site offers links to local groups, as does the National Real Estate Investors Association. (See the links at left under "Related Sites.")

“When you begin to own rentals, all the other investors start coming out of the woodwork,” said Sean Hoppe, a landlord in Pottsville, Pa., who owns 11 properties. “Through investor meetings, networking, etc., I can find out what is for sale.” (Hoppe, by the way, is 25 and hopes to retire from his job as a computer consultant in three years.)

You also can try approaching landlords directly to see if they’re willing to sell, by calling the numbers listed on rental ads in the classifieds, by cruising neighborhoods looking for “for rent” signs or by talking to any landlords you know personally.

That’s how Bob, who asked that his last name not be used, bought his rental property near Albany, N.Y. The landlord of the three-unit building where Bob had rented for 15 years was tired of the hassles and ready to sell.

“We love (the area) and jumped at the chance to buy it,” Bob said.

So far, Bob and his wife have been pleased with their purchase. They raised rents and required security deposits, which caused the property’s less desirable tenants to leave. He also has a backup plan for the building in case he starts to feel like the prior owner.

“If being a landlord got to be too big a hassle,” Bob said, “we would just get rid of the tenants and make it our own place.”

Get your finances in shape
The better your credit, and the less credit card and other consumer debt you have, the better your prospects for getting a decent loan, Callahan said. Lenders usually require bigger down payments, higher interest rates and generally stronger finances when you’re buying rental property. That’s because they know people are more likely to default on investment property than they are on their own homes.

Landlords say it also pays to have a substantial cash reserve left over after buying a property. This can help pay for unexpected repairs and vacancies. Although there are few rules of thumb, setting aside at least one month’s rent for each unit is a good start. CPA Paul Berning suggests having a line of credit, secured either by the property or your own home, to cover larger costs.

You also should make sure you can save enough for retirement and other goals before investing in rental real estate. While rental income can supplement your retirement kitty, most people shouldn’t count on it to replace other investments or allow themselves to be entirely exposed to the whims of the local real estate market. Rents and property values can fall as well as rise, and those who are adequately diversified with investments in stocks, bonds and cash will be better able to endure the bad times as well as the good.

Avoid overpaying
As one experienced landlord put it: “You make your profit when you buy a property, not when you sell it.” Pay too much, and you’ll never recoup as much as you could have had you driven a better bargain.

The rental real estate market is generally tougher on investors who overpay than on homeowners who do the same thing, several landlords said. While a home is often an emotional purchase, which can lead to “I must have it!” offers and bidding wars, most landlords look strictly at the numbers to see if their investments will pay off. If you pay too much for a rental, you can’t count on a “greater fool” coming along later to bail you out.

Not overpaying can be tough in a hot market, however. Apartments in New York, for example, currently sell at a 60% premium over their “inherent” value. In other words, they’re selling for much more than the income streams the apartments generate, according to Reis, a national real estate research firm. In San Francisco and Los Angeles, the premium is 10%.

TheLawnGnome · 10-31-2004, 08:54 PM

Thank you for the info!

Fargo · 11-01-2004, 12:37 AM

Wow, really nice article. Thanks for the contribution.

Triangle · 11-01-2004, 12:44 AM

Thanks for the guide! I was thinking about buying some property over in Wisconsin but i wasnt really sure if it was worth it or not.

Realdo · 11-08-2004, 03:09 PM

Thanks for the information! Very helpful, and easy to read.

Coofa · 11-10-2004, 03:29 PM

Thanks for the information, it was very helpful and a good read.

Asmodeus · 11-10-2004, 05:53 PM

Yes, thank you for the thread. It was very helpful!

tmckeon_PE_Orl_FL · 11-08-2007, 04:50 PM

If you are looking at vacant land or looking to redesign a site, you should always contact environmental professionals, survey professionals and, perhaps most important, a qualified Professional Civil Engineer.

Our company is aggressively looking for suitable properties for specific uses in the Central Florida area.

In Florida (primarily Central Florida) we use extensive GIS data layering and generation to locate suitable properties. We look at zoning, existing surrounding Land Use, Future surrounding Land use and more.

Please visit our company web site (just type in mckeonengineering in the address bar) to read more of what we offer (after I make the required 15 posts, I will try to come back to this post and make it a direct link).

sturatc · 12-05-2007, 11:13 AM

Hi
I read article above and find useful information about investment.
Cheers

tmckeon_PE_Orl_FL · 12-11-2007, 06:29 AM

Orlando (and Florida in general) has a new and full-service Civil Engineering and Land Development company. Services include Urban Systems Design, Urban Systems Planning, Civil Engineering design, GIS and GPS related services, cutting edge technology utilization, Project Management and more.

This is really an up and coming company. Since their webpage has been in existence (63 days as of this publication) it has already skyrocketed to the top of the search engines for their area of expertise. An example would be to search for 'Orlando Professional Engineer in Land Development' on Google. Try it and you will see.

The President, Thomas P. McKeon, P.E., has over 17 years of experience in Civil Engineering and Land Development primarily in the Central Florida and Brevard County areas. He Graduated from the University of Central Florida (UCF) in 1990. Since then he has worked in the Civil Engineering field with progressive levels of responsibility.

The new opening of this company is looked on as a boon to the Central Florida area and there are sure to be other articles to come. Stay tuned.

company website: www .mckeonengineering.com
company forum: www .engineertrades.com
company email contact: tmckeon_PE @mckeonengineering.com
company phone contact: 407-928-7192

lilies34 · 12-15-2007, 05:50 AM

Wow. Hey, thanks for the info!!

NicholasMooney · 05-12-2008, 08:49 AM

thank you ever so much!

rachael24 · 05-19-2008, 02:04 PM

Good article...

The new opening of this company is looked on as a boon to the Central Florida area and there are sure to be other articles to come. Stay tuned.

Keep us updated if you can!

kevinson · 07-21-2008, 03:03 PM

Nice thread! I really like your provided information. It's really helpful for me.
Thanks a lot!

darryl · 06-22-2009, 12:33 PM

Real estate investors looking to make that first real estate investment undoubtedly have become aware that finding a good income property to purchase can be daunting. Good real estate investment deals don't grow on trees, and unless we're very fortunate, it's unlikely they will simply fall into our lap.Making the decision to purchase rental property is easy. What's going to be a bit complicated is finding a profitable rental property. This normally takes time, connections and lots of research.There are various ways for it.Thanks for sharing with all..

10-26-2004, 05:32 AM	#1
Sloppy Junior Member Join Date: Oct 2004 Posts: 9	How To Find Good Investment Property The idea of owning rental real estate seems to be gaining popularity as investors tire of the swoops and swoons of the stock market. As I pointed out in a separate column, not everyone has what it takes to be a landlord. But those who do may find rentals to be a good way to build wealth. Once you’ve made the decision to buy rental property, your real work begins. Finding a profitable rental property usually takes time, connections and plenty of research. Here’s what you need to know to get started: now your time horizon As with any other investment, you should have a good idea how long you plan to own a rental property before you buy it, says Robert Cain, publisher of the Rental Property Reporter newsletter. The longer you plan to own the property, the more you’ll probably need to invest in maintenance, repairs and improvements, Cain said. “If you’re keeping it for 20 years, at some point you’re going to be putting a new roof on that property. You’re going to be putting in new appliances and doing some major repairs,” Cain said. If you’re only planning to own a property for five years, by contrast, you’ll probably want to avoid making any major improvements unless you’re sure you can recoup the cost with a higher sale price. You also may face more investment risk with a shorter time horizon. Although your rental will almost certainly appreciate over 20 years, it could easily lose value in the next five, particularly if you’re buying in an overheated market. You’ll need a bigger potential annual return to make up for that risk. For many small investors, long-term ownership makes the most sense, said Pat Callahan, an attorney, landlord and founder of the American Association of Small Property Owners. You’ll have plenty of time to ride out any swings in the market, and rental income can make a nice supplement to your day job. Find enough rental properties, and being a landlord may become your day job. Develop a network Experienced landlords find their properties in a variety of ways. Some hunt for foreclosures, making friends with city hall clerks or bank employees who know which properties are about to be sold. Some run ads in local newspapers. Others work with real estate agents who keep their eyes peeled for possible buys. Several landlords recommended joining a local landlord or property owner's association to make contacts. Callahan’s Web site offers links to local groups, as does the National Real Estate Investors Association. (See the links at left under "Related Sites.") “When you begin to own rentals, all the other investors start coming out of the woodwork,” said Sean Hoppe, a landlord in Pottsville, Pa., who owns 11 properties. “Through investor meetings, networking, etc., I can find out what is for sale.” (Hoppe, by the way, is 25 and hopes to retire from his job as a computer consultant in three years.) You also can try approaching landlords directly to see if they’re willing to sell, by calling the numbers listed on rental ads in the classifieds, by cruising neighborhoods looking for “for rent” signs or by talking to any landlords you know personally. That’s how Bob, who asked that his last name not be used, bought his rental property near Albany, N.Y. The landlord of the three-unit building where Bob had rented for 15 years was tired of the hassles and ready to sell. “We love (the area) and jumped at the chance to buy it,” Bob said. So far, Bob and his wife have been pleased with their purchase. They raised rents and required security deposits, which caused the property’s less desirable tenants to leave. He also has a backup plan for the building in case he starts to feel like the prior owner. “If being a landlord got to be too big a hassle,” Bob said, “we would just get rid of the tenants and make it our own place.” Get your finances in shape The better your credit, and the less credit card and other consumer debt you have, the better your prospects for getting a decent loan, Callahan said. Lenders usually require bigger down payments, higher interest rates and generally stronger finances when you’re buying rental property. That’s because they know people are more likely to default on investment property than they are on their own homes. Landlords say it also pays to have a substantial cash reserve left over after buying a property. This can help pay for unexpected repairs and vacancies. Although there are few rules of thumb, setting aside at least one month’s rent for each unit is a good start. CPA Paul Berning suggests having a line of credit, secured either by the property or your own home, to cover larger costs. You also should make sure you can save enough for retirement and other goals before investing in rental real estate. While rental income can supplement your retirement kitty, most people shouldn’t count on it to replace other investments or allow themselves to be entirely exposed to the whims of the local real estate market. Rents and property values can fall as well as rise, and those who are adequately diversified with investments in stocks, bonds and cash will be better able to endure the bad times as well as the good. Avoid overpaying As one experienced landlord put it: “You make your profit when you buy a property, not when you sell it.” Pay too much, and you’ll never recoup as much as you could have had you driven a better bargain. The rental real estate market is generally tougher on investors who overpay than on homeowners who do the same thing, several landlords said. While a home is often an emotional purchase, which can lead to “I must have it!” offers and bidding wars, most landlords look strictly at the numbers to see if their investments will pay off. If you pay too much for a rental, you can’t count on a “greater fool” coming along later to bail you out. Not overpaying can be tough in a hot market, however. Apartments in New York, for example, currently sell at a 60% premium over their “inherent” value. In other words, they’re selling for much more than the income streams the apartments generate, according to Reis, a national real estate research firm. In San Francisco and Los Angeles, the premium is 10%.

11-08-2007, 04:50 PM	#8
tmckeon_PE_Orl_FL Professional Civil Engineer, Orlando, FL Join Date: Nov 2007 Location: Orlando, FL Posts: 3	Vacant land investing If you are looking at vacant land or looking to redesign a site, you should always contact environmental professionals, survey professionals and, perhaps most important, a qualified Professional Civil Engineer. Our company is aggressively looking for suitable properties for specific uses in the Central Florida area. In Florida (primarily Central Florida) we use extensive GIS data layering and generation to locate suitable properties. We look at zoning, existing surrounding Land Use, Future surrounding Land use and more. Please visit our company web site (just type in mckeonengineering in the address bar) to read more of what we offer (after I make the required 15 posts, I will try to come back to this post and make it a direct link).

12-11-2007, 06:29 AM	#10
tmckeon_PE_Orl_FL Professional Civil Engineer, Orlando, FL Join Date: Nov 2007 Location: Orlando, FL Posts: 3	New and innovative Civil Engineering company McKeon Engineering & Associates, LLC Orlando (and Florida in general) has a new and full-service Civil Engineering and Land Development company. Services include Urban Systems Design, Urban Systems Planning, Civil Engineering design, GIS and GPS related services, cutting edge technology utilization, Project Management and more. This is really an up and coming company. Since their webpage has been in existence (63 days as of this publication) it has already skyrocketed to the top of the search engines for their area of expertise. An example would be to search for 'Orlando Professional Engineer in Land Development' on Google. Try it and you will see. The President, Thomas P. McKeon, P.E., has over 17 years of experience in Civil Engineering and Land Development primarily in the Central Florida and Brevard County areas. He Graduated from the University of Central Florida (UCF) in 1990. Since then he has worked in the Civil Engineering field with progressive levels of responsibility. The new opening of this company is looked on as a boon to the Central Florida area and there are sure to be other articles to come. Stay tuned. company website: www .mckeonengineering.com company forum: www .engineertrades.com company email contact: tmckeon_PE @mckeonengineering.com company phone contact: 407-928-7192

07-21-2008, 03:03 PM	#14
kevinson Junior Member Join Date: Jul 2008 Posts: 10	kevinson Nice thread! I really like your provided information. It's really helpful for me. Thanks a lot!

10-31-2004, 08:54 PM	#2
TheLawnGnome Member Join Date: Oct 2004 Posts: 39	Thank you for the info!

11-01-2004, 12:37 AM	#3
Fargo Junior Member Join Date: Oct 2004 Posts: 11	Wow, really nice article. Thanks for the contribution.

11-01-2004, 12:44 AM	#4
Triangle Junior Member Join Date: Nov 2004 Posts: 9	Thanks for the guide! I was thinking about buying some property over in Wisconsin but i wasnt really sure if it was worth it or not.

11-08-2004, 03:09 PM	#5
Realdo Junior Member Join Date: Nov 2004 Posts: 7	Thanks for the information! Very helpful, and easy to read.

11-10-2004, 03:29 PM	#6
Coofa Junior Member Join Date: Nov 2004 Posts: 7	Thanks for the information, it was very helpful and a good read.

11-10-2004, 05:53 PM	#7
Asmodeus Junior Member Join Date: Nov 2004 Posts: 6	Yes, thank you for the thread. It was very helpful!

12-05-2007, 11:13 AM	#9
sturatc Junior Member Join Date: Dec 2007 Posts: 4	Hi I read article above and find useful information about investment. Cheers

12-15-2007, 05:50 AM	#11
lilies34 Junior Member Join Date: Dec 2007 Posts: 3	Wow. Hey, thanks for the info!!

05-12-2008, 08:49 AM	#12
NicholasMooney Junior Member Join Date: May 2008 Posts: 12	thank you ever so much!

05-19-2008, 02:04 PM	#13
rachael24 Junior Member Join Date: May 2008 Location: Binghamton, NY Posts: 25	Good article... The new opening of this company is looked on as a boon to the Central Florida area and there are sure to be other articles to come. Stay tuned. Keep us updated if you can!

06-22-2009, 12:33 PM	#15
darryl Member Join Date: Apr 2009 Posts: 43	Real estate investors looking to make that first real estate investment undoubtedly have become aware that finding a good income property to purchase can be daunting. Good real estate investment deals don't grow on trees, and unless we're very fortunate, it's unlikely they will simply fall into our lap.Making the decision to purchase rental property is easy. What's going to be a bit complicated is finding a profitable rental property. This normally takes time, connections and lots of research.There are various ways for it.Thanks for sharing with all..