When looking at investment property
be realistic in what you are considering.
Many times I have investors come to me
and ask for advice on whether or not they
should purchase a piece of real estate.
Some have extensive spreadsheets with
unrealistic figures for income
and expenses.
A 20% vacancy rate is pretty realistic, yet
if you are going to go higher have a very good
reason as to why you have come up with that
figure. Maybe it is an apartment building that
has high vacancy rate now and you
need time for repairs in order to get new tenants.
On the income side, check to see what rents are
in your immediate area. Don’t think that you
can raise rents without knowing whether
or not the area can support an increase. I
have seen many landlords raise rents when
they purchase a building to later have to reduce
them because the market place said no. A good
web site to go to in www.RentOMeter.com
which will give you an idea of what the current
rents are in your area.
When you calculate expenses be mindful of whether
or not you as a landlord are paying some or all utilities.
If you figure 45%-50% expense factor and you are
not paying for utilities then you need to reassess
your position.
Also when you are considering purchase of a rental
property, always insist that you see the sellers last
2 years operating statements and his/her filed income
taxes. I have yet to see a seller being honest in listing
all operating expenses.
Be methodical in your approach.