the pros and cons of each market. Note, you can browse deals from multiple markets at the same time, but it does take time and practice to really understand a market, so I suggest starting small and branching out as you go. Conduct market research based on your investment strategy and then choose a solid cash flow market to start looking into. For example, if you are looking at buying 2-4 unit properties, look for markets that have steady or growing populations, job growth, and meet the one percent rule. The one percent rule means that the monthly rent is equal to or greater than one
If you are looking to buy apartments, you should still consider population and job growth, but also evaluate market cap rates and whether they are a fit for
usually somewhere in between the current NOI/Cap Rate and the future NOI/Cap Rate. Once you have selected a market start building your team of professionals local to your chosen market. This involves finding and interviewing realtors/brokers, general contractors (if rehabbing), inspectors, and property managers.
what you are trying to accomplish with your investing strategy.
For example, are you looking to invest in a value add or stabilized property? A stabilized property has market occupancy rates and rent rates similar to other properties on the market. To find the value of these properties simply take the property’s Net Operating Income (NOI) and divide it by the average Cap Rate for that type of property. If the property is not stabilized, and is below the current market occupancy and rates then the value of the property is based on its potential or value add. For a value add property you must identify what expenditures you’ll need to get the property stabilized and determine a fair price,
STEP #2: INVESTIGATE Once you select the
market(s) you want to invest in, put your team in place, and have deal flow, it’s time to start crunching numbers and making offers. You may need to place multiple offers until you get one accepted. Once your offer is accepted you’ll enter the Investigate Phase. During your inspection period, you’ll need to investigate everything about the property - the ARV (after repair value) and how much renovation it needs (if applicable), the current rents, the market rents, and the actual condition of the property from an independent ASHI certified home inspector’s point of view.
percent of the total purchase price of an investment property.
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