Do Your Own Due Diligence and be a Disciplined Investor

  • Thread starter Prestige Property Advisor
  • Start date
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Prestige Property Advisor

New Member
It is crazy how real estate attracts the con-men :madhot:. Countless times I see properties everyday being marketed as a Cash Flowing Landlord Deals, yet to peal back the information to find these deals are toxic and will actually COST MONEY TO OWN!

I work with hundreds of Foreign Real Estate Investors to find investment properties. I am not a real estate agent but Real Estate Investor myself. I buy and sell hundred of properties each month. I teach two simple rules. Buy at no more than 75% ARV and to multiply your total cash purchase (purchase price plus repairs) by 2% and if that number is not equal too or greater than your month rent you should seek a deal else where. Now the 2% is one that can be "cheated" depending your preference. Typically you can see an cap rate of 12% with that rule.

The reason for the 2% rule is simple; 50% of your gross rent will over time be spent for various things (maintenance and repairs, vacancy, property management, utilities, etc). So if you have a property at $50,000 you need at least $1000/month. You will potentially see a $12,000 a year in gross profit. Now 50% of that will be spent following the rule so you end up with $6000.00. So 6,000/50,000=12% ROI.

To find the rental comps use a site called rentometer or hotpads . To find the value of a house you can use the free sites or a paid AVM.

Hope this helps.
 
Drew Drew

Drew Drew

New Member
Prestige - pretty good advice for the current housing conditions.

My only concern would be a newbie just focusing on your 2% rule and setting themselves up for future trouble. There are some areas of the city of Detroit that you could get 3% or even 4%, but I wouldn't recommend investing there. Once you add in the cost of the inevitable strip & rehab, your maintenance costs increase significantly.

So, as always, it's also location, location, location - and I'm not talking about just picking a city. You have to know all the subsections of the city you choose to invest in!
 
R

rrwolfpack

New Member
Couldn't agree with you more RoyalRose. What sources do you use in order to find out where are the best locations to invest in around the country?
 
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