Vicki Irvin-Maryland Real Estate Investing-Vicki Irvin

10 – Profiting from Real Estate Purchases, Part 2- Maryland Real Estate Secrets
Vicki Irvin
Lloyd Irvin
The Real Estate Investment Queen

2. Look in Better (but Not the Best) Neighborhoods

The better the neighborhood, the easier it will be to rent and eventually to sell (or trade) your property. Homes in good neighborhoods are always in demand, while those in poor neighborhoods languish. On the other hand, don’t try for the very best areas. They are often over-priced and you’ll find it hard to find an investment property there that will rent for enough to cover your monthly costs.

Homes in the top neighborhoods, however, often make the best flip properties. If you buy low here, you often have the best chance to immediately resell for a big profit.

What makes a good neighborhood? Look for attractive homes; and avoid areas where landscaping is neglected. Look for wide streets; avoid areas where abandoned cars litter streets. Look for conformity in housing; avoid areas where there is a hodgepodge of homes.

TIP: Check the schools. The biggest indicator of a good neighborhood is that it has quality schools, as evidenced by high scores on standardized tests (always available at the main school district office, or online). Poor schools mean a poor neighborhood.

3. Look for Flippable Properties

The term “flipping” has come into the real estate vernacular along with the big boom in property values. It essentially means that you quickly buy and then resell a property without holding on to it for long. If you can flip a property and can make cash on it, the reasoning goes, do it.

I agree, up to a point. The cash generated by flipping can go toward your own income (supporting yourself) as well as toward creating capital for the down payment on another property. Flipping, when possible, has always been a good way to generate cash from real estate.

The mistake that some people make, however, is to look only for flippable properties, or to try and flip properties that really aren’t suitable. It makes little sense to flip a property to make $10,000 when if you hold it for a year, you can make $100,000. Also, out of 10 properties you look at, you’ll be lucky to find one that’s truly flippable. Yet, five of the others might be good for holding, renting, and then reselling.

4. Look for Strong Tenant Markets

It’s a truism that there are always tenants. But, the underlying fact is that in some locales, there are more tenants than in others. And in some locales, the tenant population can afford to pay a higher rent than in others. Ideally, you want to buy in an area where there are lots of high-income tenants.

It’s important, here, to think locally. The country may be doing well economically, but your area may be doing better, or worse, than the nation as a whole. In order to get a tenant for your property, you must be able to draw on local workers. If there are few well-paying local jobs, you won’t get many good tenants.

As a consequence, it’s important to do a tenant analysis before leaping ahead and buying rental property. There are a variety of ways to accomplish this: First, if you’re buying into low-income housing, look for blue-collar tenants. That means industrial plants will be nearby. On the other hand, if you’re buying an upscale property, look for white-collar workers. Check in the area for office buildings, commercial buildings, financial institutions, and the like.

Second, think like a tenant. If you’re a tenant, who’s going to employ you? Look around the area. Who are the big employers? Find the place that the tenant wants to live and that’s where you’ll have your strongest tenant market.

Third, check the local newspapers under “Homes for Rent.” You’ll quickly see which areas have rentals. Call to see what the prices are (if they aren’t listed). Then recheck the same paper over several weeks. If you find areas which have the same homes advertised for weeks on end, avoid those. If there are areas where homes rarely crop up and then the ad appears only for a single weekend, go there. That’s where the tenants want to live! Areas which rent quickly indicate a good rental market. Areas with lots of vacancies do not.