Buying a House for Rental Property Investment

Buying a House for Rental Income

In the last section we discussed why buying a house as an investment was the best strategy for generating a rental income stream. Some of what we'll cover here:

• What strategy to use
• Who to buy from
• How much to pay for a rental property
• Should you use a Realtor?

The strategy you use depends a lot on your current circumstances. Are you young, single with lots of energy and time? Are you living in a rental now? Are you stuck in one location because of family (e.g. school districts)? Do you own a home now from which you could get a HELOC? Do you have cash to invest or do you need to find money for a down payment? How good is your credit score?

Here are some recommendations to develop a real estate business plan based on your situation.

Who to buy a house from? In a phrase - "motivated sellers". What is a motivated seller and how do you find them? Here's some characteristics of motivated sellers.

Buying a house from a motivated seller is one way to buy discount investment property . There are others at the link above.

Should you use a Realtor? I've purchased the majority of my properties with the services of a Real Estate Agents & Realtors. Many States require agents to disclose if they are buyers agents or sellers agent.

If you use a Realtor make sure that the one you chose is a buyers agent.

Some people may think that using the sellers agent may lower their fees since there is only one agent involved. But I have never had that experience. What I have found is that sellers agents are usually quite defensive about the value of the sellers property (as they should be). They are sometimes as insulted by low offers as the sellers are. They are also less likely to disclose the type of information that can help you determine if the sellers are motivated.

Many people think that looking for FSBO (for sale by owner) properties is the better way to go. For the most part FSBO sellers ask too much and tend not to be very flexible. Most have no access to market data and so are unrealistic about the value of their property.

Other forms of advertising, like signs, mailing post cards and foreclosure lists can be useful. I've used all of these with some success. However, unless you are intending on making real estate a full time career, I don't feel that these methods of advertising are worth the trouble. Learn how to find foreclosure properties. This is sure source of motivated seller.

Is there any rule about how much to offer for a property? Yes, use the 1% rule and 40% rules when buying rental properties. Before you make an offer on a house, make sure that you do a thorough rental property analysis and due diligence.

How much should you offer for a property? There seems to be some myths about this. Americans are typically lousy negotiators. I've sometimes watched an HGTV program called "Property Virgins". The Realtor gives horrible advice to her clients in regards to how much to offer when buying a house. Here's some real life examples of properties I have bought using creative real estate ideas.

Use this investment property calculator to get an idea about whether the property will provide a positive cash flow or bleed you to death financially.

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