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Q. How do I know if a property will be profitable?
A. Well, there are no guarantees. But stick to a few basics. Here in the Greater Kansas City area there is no reason you cannot find a property that you can rent out for no less than .007% of it's current market value if it's a single family home and maybe even up to .012 for the right multi-family home. Anywhere in the middle of those two numbers is great. In the Johnson County, Kansas area this can be easier said than done. But there are many areas around Kansas City that you can accomplish that, or better. There are, of course, variables involved like age of property, quality of school districts, current vacancies and so forth.
Q. What is Market Value?
A. The current value you would receive if you sold your home on the open market.
Q. What is Gross Rental Income?
A. The total amount of rent you receive when a unit(s) is fully occupied. AKA your GRI.
Q. What is Net Rental Income?
A. Your GRI minus your vacancies.
Q. What is Net Operating Income?
A. Your NRI minus any expenses such as maintenance, utilities, property taxes and more. Seek expert advice when determining expenses.
Q. When is the best time to get started with Investment Property, Rental Property, Leasing...?
A. Yesterday or today! A market can be up. Or a market can be down. Either way, if you are patient/aggressive and work with a professional, you can find a rental/investment property that is right for you. The biggest regret most property investment professionals have is not starting sooner.
Q. What kind of Real Estate Investing do you recommend?
A. This can vary widely from client to client. You may not even realize all the different ways you can be a real estate investor. Mostly all the variations boil down to one of three categories;
Buy & Hold - holding for a number of years, usually as a rental property. It's the best way to build wealth.
Buy & Sell - here you could go off in hundreds of directions including fixing, flipping, leasing optioning, wholesaling and many, many more. Great for cash flow. But be careful. It carries the most risk.
Buy & Live - easiest way to get started. Rent the home you currently own, then buy another. Live there a year or two, rent that home, then buy another. Etc. (If you are young and/or limited on your qualification possibilities, this is a great way to acquire properties.)
As a professional REALTOR® I can help you with Buy & Hold and Buy & Live more than I can help you with Buy & Sell. The reason is very simple. Buy & Sells usually have to be purchased at a significant discount. Most people under enough duress as to sell their properties at a 25% discount (or more) usually do not have the time it would take to go through a REALTOR®. There are exceptions of course. And when I see something on the MLS system I immediately send it out to all the Investors I work with. If you would like to be added to that list of investors just email me at listwithchris@kw.com and state that you are looking for good Buy & Sell properties.
Q. What are the advantages of multi-family homes vs. single family homes?
A. Quite simply, you have more rent coming in from multi-family homes than you do with single family homes. The more units you have under one roof the less risk you have. (If one of your four-plexes is empty for a month or two you still have 75% of your GRI coming in. What if you are empty for one or two month with your single family holdings?)
Secondly, cash flow is almost always greater with multi-family rental homes. A third, but not final, reason is that when you own multi-family homes vs. single family homes all your maintenance is in one location. Need to replace the roof of your tri-plex? How about mowing? It's all in one place. Three single family homes all require their own roofs and the cost just went way up from a tri-plex!
Am I saying do not own single family rental homes? Absolutely not. What I am saying is it is good to have a mix in your residential investment property portfolio just as you would your stocks and bonds portfolio. Afterall, see if you can come up with a few reasons you would rather own single family homes. I can name four right off the top of my head!
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