Tip of the Month - October 2016

Real estate management is the operation of property for the purpose of maximizing income, increasing value, and protecting the asset. When property owners seek to purchase rental properties, they must do so with these goals in mind.

LOCATION: The property should be located in a growing area or an area of future growth ( known as the “path of progress”). Neighborhoods normally go through a five-stage life cycle, progressing through growth, maturity, decline and rehabilitation stages. Property values typically fall during the decline stage. Property owners should make a careful study of the property’s location with these cycles in mind.

FINANCIAL TERMS: The finance terms of a sale contribute significantly to the desirability of the property. Favorable interest rates, low down payments, long maturity rates, and fix-up allowances are all ways to make purchases more feasible. Agreements with sellers, including carry-back of second mortgagesor trust deeds, can almost make investment properties more attractive to prospective buyers.

TIMING: The timing of a purchase is a central consideration: for example….purchasing during a period of economic growth (1978) would experience a high rate of appreciation in value. If the same property is purchased in (1990) might likely experience losses.

TIP FROM CROSSETT REAL ESTATE SERVICES: What is the economic cycle of your neighborhood?