Tip of the Month - October 2016
PURCHASING RENTAL PROPERTY
Source: Essential Facts-Real Estate Management
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?
This web page was updated on 09/27/2016.