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How Not to Get Burned When Buying Rental Property
It is a unique historical moment for investing in U.S. real estate as th...
works for you (not for the seller or an agent), to complete a full independent home inspection.
The inspector should ident...
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How Not to Get Burned When Buying Rental Property

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http://www.maverickinvestorgroup.com | Doing thorough due diligence at the macro market, micro market, and individual property level is essential to avoiding common mistakes and maximizing the profitability of your real estate investment.

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How Not to Get Burned When Buying Rental Property

  1. 1. How Not to Get Burned When Buying Rental Property It is a unique historical moment for investing in U.S. real estate as the aftermath of the housing meltdown has left many high-demand properties for sale at once-in-a-lifetime prices. The U.S. real estate market is in a soaring recovery phase, providing substantial upside potential for investors that buy today, as well as highly advantageous price to rent ratios that help maximize positive cash flow if you buy in the right markets. Maverick Investor Group helps individual investors buy and hold residential investment property in the best real estate markets, providing them with access to off-market turnkey properties that start generating income on day one. Many smart investors are taking advantage of the situation and dramatically increasing their wealth. However, one of the more common mistakes that prevents real estate investors from getting the maximum return on their investment is failure to do proper due diligence before they buy. I have seen investors try to blame everyone from the agent to the seller to the economy, but ultimately the responsibility for due diligence lies squarely with you. Therefore, it can save you a lot of money and headaches to learn how to do it properly. Thorough due diligence starts at the macro market level, goes down to the micro market level, and of course includes the individual property and any home owner association that may exist as well. Proper due diligence will help you make the safest, smartest decisions when buying rental property. Here is just a cursory overview of what to look for: ● Macro Market Trends – Are jobs increasing or decreasing? Are people moving in or moving out? Look for net positive indicators showing that demand is rising for housing and rentals. ● Micro-Market Rental and Vacancy Rates – How much do similar properties in the area rent for? How much can you realistically expect to collect in rent from a qualified tenant? How desirable is the property to the types of renters you want to attract? What is the local vacancy rate? How long would you likely have to wait after a tenant moves out before you get another qualified tenant willing to pay market rent? ● Home Prices – Are home prices increasing or decreasing? If they are increasing, where are they in the current property cycle? How far below peak values are they, and how far below the historical trend line are they (How much upside potential remains)? How do median home prices compare to median incomes in the area? Will the average income earner in that market be able to afford to purchase the property from you when you are ready to sell down the road after prices rise? Maverick can show you how to evaluate properties for these and other fundamentals. Also, when evaluating investment properties, be sure to hire a professional home inspector that
  2. 2. works for you (not for the seller or an agent), to complete a full independent home inspection. The inspector should identify any major structural or other defects that may indicate the home isn’t a good investment and should also identify minor issues you’ll want to have the seller fix before you close on the property. If the property has a home owners association, be sure to investigate the dues, what they cover, the policy for increasing the dues and, perhaps most importantly, the current state of HOA solvency--reserves, number of delinquent owners, etc.—so you are not purchasing a property in a community that will soon decline because of other owners defaulting on their HOA dues. Running the numbers for the property and independently verifying each itemized expense is crucially important as well. Find out how much you will owe in property taxes, insurance, homeowner association dues if any, property management fees, and mortgage payments if you are financing the purchase. Ensure that you also estimate for the inevitable vacancy periods and periodic maintenance, both of which will cut into your cash flow, in order to get the most accurate projections of what you expect your cash flow to look like. Ensure you receive all the documentation from the Title Company, showing the property has been legally transferred to you with no blemishes on the Title, along with your Title insurance in case anything unexpected arises later down the line. You should also consult your own CPA, legal and financial advisors about your purchase, ensuring that you are taking all of the most prudent steps towards maximizing tax benefits, asset protection, etc., based on your individual situation. By doing your due diligence properly and thoroughly you can cut down on the most common and costly mistakes that real estate investors make when buying rental property and get a major head start towards realizing your financial and lifestyle goals. Summary: Doing thorough due diligence at the macro market, micro market, and individual property level is essential to avoiding common mistakes and maximizing the profitability of your real estate investment. About Maverick Investor Group Maverick Investor Group serves individual real estate investors exclusively. We provide you private access to off-market buying opportunities for performing residential investment property in the best real estate markets. We also introduce our clients to the tax, legal and other professionals that can further help you maximize your profits and meet your real estate investing goals. For more information visit us at: http://www.maverickinvestorgroup.com 702-940-6568

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