The housing market is at an all-time high with home and rental prices surging across the United States. Is now the right time to buy properties? Here is what you should be thinking about before getting started with real estate today. If you have the capital and a solid plan for investing there are several opportunities an investor can find especially in the form of residential rentals.
Coastal Equity Group offers long-term investing options for single family, townhomes, condos and up to 4 units. All opportunities to create supplemental income. Ultimately, successful real estate investing comes down to 3 things: the property, leverage, and management.
Step 1 – Finding the Right Property
Property values are hot and it’s not expected to change any time soon which means rents are climbing as well. For first time investors or those looking to grow their portfolio, we recommend markets just outside the urban hotspots and assessing localized economic factors such as employment rates to spot signs of a solid, growing markets. This is where hidden gems can experience strong growth
Next, you’ll want to assess your investing goals. Are you investing primarily for cash flow, appreciation, or both? In certain booming markets, you may get less cash flows (lower net returns) but better appreciation. In other markets, you will see higher cash flow, but less price growth. Look at historical appreciation rates on websites like Zillow to get an idea on how much housing is likely to increase in the future.
Always run the numbers to see what type of cash flow your property is expected to produce. Two popular metrics to consider are cash-on-cash returns – the net returns you will generate as a percentage of the amount of cash that you have personally invested. Or Cap Rates – the net operating income (NOI) divided by the total purchase price.
Here is an example of cash-on-cash returns, if you’re going to make $400 (after expenses) every month on your rental, that is $4,800 per year. Let’s say your cash investment for this property was $55,000. The $4,800 divided by $55,000 is 8.7%. Keep in mind this does not consider appreciation.
Step 2 – Leverage and Structuring your Deal
How your deal is structured has a major impact on your returns on investment. Many investors turn to hard money and private money lenders to reduce the amount of cash they invest on a property, have a lower credit score and need to get the deal funded faster. Working with hard money benefits you by allowing you to purchase multiple properties to grow your cash flow and appreciation on multiple assets. While keeping your investments separate from your personal debt to income ratio.
Step 3 – Management Strategy
To avoid going south on a property, you’ll need to put together a good management strategy. In today’s time, there are many tools and services that make managing rental properties scalable. Do your research and ask your investor friends what they have experienced and who they enjoy using.
There is a great deal of opportunity out there for investors to benefit from this market. Coastal Equity Group helps you streamline your lending process with a variety of loan programs at competitive rates. We’ll help you scale your portfolio in 2022. Email our team today at firstname.lastname@example.org or call (843)737-0182.