There’s different mediums to find such properties. You’ll have the most exposure on the internet video of sites such as zillow.com redfin.com trulia.com realtor.com loop.net and other similar website. What many investors do as well is drive by neighborhoods they have an interest in investing and look at houses that need a little TLC or are behind in maintenance and inquire who owns that property once they’re able to get in contact with the owner by means of looking up to see city/county records or by sending them mail asking them if they would like to sell the property. If someone is living in the property you can leave them a letter with your information and that you’re interested in purchasing the property. This is also the way you purchase real estate with no money down. You in contacts with a property owner that is not doing anything with their property that may live somewhere else and has a property that is not producing anything and decaying while they’re paying taxes basically a liability in their finance and you offer to work out a payment plan with them. It’s a win-win situation since the owner is losing money holding onto a non-producing property and the investor gets to own a property with no money down and begin the renovation to get it rental ready. However there is another way and is how I find the best deals. The wa6 I have founf the best deals is through word of mouth. Networking with people that may or may not be involved in real estate that may know someone that is selling a house or know someone that has passed away and the property was inherited by their daughter or son whom don’t know what to do with the property nor want to become landlords. This is opportunity knocking to get a property at a highly discounted rate. Many times the inherited party views property as a nuisance since they have no intentions of becoming landlords nor want to managed the upkeep and pay taxes. One of my better deals was when I was looking to buy a duplex and met the owner during the viewing of another property. I started conversing with them and ask him about renting and buying properties within the vicinity. After about 20 minutes he mentioned in nonchalant manner that he was looking to sell another property which he had not placed on the market or had not told anyone yet. I inquired what the property was and it so happened to be a fourplex building with many upgrades Electrical Plumbing Central AC large units with high ceilings three or two bedrooms one was three bedrooms a lot had been put into this property. The going rate for this property at the time was $125,000 and I bought it for $60,000 and even though I inherited subpar tenants it begin to cash flow immediately. I can say undoubtedly that if this 4-Plex would have been placed anywhere on the internet it would had not lasted a day. The best deals are when they haven’t yet been advertised to the market. Whether that be the internet or newspaper or any other medium. Every time I start a conversation with someone I try to give it to real estate if they know anyone that’s selling property. Big be surprised how many people know someone that’s selling property that hasn’t been placed on the market, I want to get rid of it and due to external factors need to sell it the sooner the better. This is one of the pros in this real estate business is at everyone in one way or another is involved in it either you’re a renter or a home buyer or someone who has received property via inheritance. The reason this is a pro is that although everyone is involved not everyone cares to do business with real estate and may not be willing to put the effort to get the most out of their property that’s where an opportunity to get a good deal comes into play.
The reason why I chose to purchase rental property in low-income neighborhoods is because of the return on investment or ROI. With enough research and due diligence it’s not uncommon to get anywhere between 20 to 30% on ROI. So you may be asking what’s the catch? Why aren’t all Real Estate Investors buying everything in low-income neighborhoods? The truth is that there are many Real Estate Investors that specialize in buying rental properties in low-income neighborhoods. There are also other investors that diversify in having rental properties in low-income neighborhoods and rental properties in upper to middle-class neighborhoods as well. However you will find a group of investors that would not purchase rental properties anywhere near a low-income neighborhood. The reason being is that low-income neighborhoods require more work to manage. It requires a more Hands-On property management. For starters, you have a higher percentage of evictions. Many of your tenants live paycheck-to-paycheck. If they lose their job or have an unforeseen emergency expense such as their car breaking down, could mean a tenant paying rent late or not paying rent at all. Most low income neighborhood property landlords know that this is a reality in their pool of tenants. The way landlords have managed to leverage this reality is by accepting tenants that are enrolled in Section 8 vouchers. The Housing Authority helps low-income families pay rent. The Housing Authority will deposit up to 100% of the rent amount directly into the landlords bank account. It is a stable and secure way of always getting rent paid on time. Uncle Sam pays its bills. However there’s still the caveat of the quality of tenant that will be residing in your property. As a landlord you still need to provide proficient screening to avoid getting a destructive or problematic tenant regardless if the rent is being paid on time. However if you screen your tenants right and use a backup system such as Section 8 you can have very good ROI and your property.
You may be feeling the need to jump in and invest due to anxiousness in starting your role as an investor and have that feeling of urgency with the thought in your mind that if I don’t get in now I’m going to lose all the opportunities and all the good deals. While this may be true it is only a valid decision once you have ample experience in the field of such investment otherwise it is speculative move in that I mean you are gambling regardless of what industry you are investing in it: real estate, stock market, currency, Etc.
Many self help development gurus swear by investing in real estate. The literature is abundant of self-made millionaires real estate investor that you get the feeling that an investment in such industry is bulletproof. What could go wrong? After all real estate hedges against devaluing fiat currency such as the US Dollar; the idea of tenants paying a monthly fixed income per months sounds financially enticing and then there’s the appreciation where after holding your real estate invest for an unknown amount of time you make a profit in selling it.
Seldomly do “get rich” books and gurus guide you to read between the lines in investing in real estate. No one wants to ruin a parade or be the party pooper. However, as much of a guideline it is to be rich should be what be what to avoid and how not to fail. Being told what not to do doesn’t sell as much as providing hope and a can-do guide which I believe is essential.
Here I’m going to focus on one caveat, though there are several worth mentioning but I’ll save those for another post, in real estate investing. The first one is know your Market. And I believe this to be one of the hardest to determine when you’re starting out. Lower-income neighborhoods, for example, look great on paper. The return on investment is anywhere between 20 to 30% and you may ask yourself “how can I go wrong?” With this investment, even if I have to go through an eviction every now and then and rents are lower than in other well off neighborhoods, I’ll still be making nearly 20% on return on investment. However, if you got into real estate investing because you wanted to live a less stressful life or wanted to spend more time with friends and family or go on vacation every know and then while having your real estate income accumulate in your bank account then it may surprise you that you could be placing your self to even further distant than you are already to achieving these objectives. In other words, you’re headed towards another full-time job only this time the job title is: property manager.
Owning rental properties in such neighborhood requires time and a lot of patience. You’ll soon learn that the evictions come a lot more frequently than anticipated. Evictions are a landlord’s kryptonite as far financial stability. They can literally bankrupt you. And then there’s consciousness of having to place families or single parents out with children on the street. Even though they are at fault, It gets to you. In addition, many of the tenants you’ll deal with have some lack of disciplinary framework or are in financial hardship due to drug or alcohol dependency issues. You hope and would be fortunate to get a tenant that is in section 8 where most of their rent is being covered by the government and they are in some form or another in permanent disability. Not that you condone their current state of being only that given their situation, you have a form of symbiosis where you’ll have better financial stability while providing them your services in keeping a clean and safe habitable environment for them to live.