2. Purchase price. This is the amount you pay to acquire the property. You make your money when you buy the house. Consider the current property condition and potential repairs before you make an offer. 3. Rehab costs. These costs include all expenses associated with ren - ovating and repairing the property. Don’t forget about the crawlspace and attic. Hidden problems will cost you the most. Your rehab costs should include materials, labor, permits, and any additional fees. Always complete a detailed scope of work. Doing your own work does not save you money! Using these formulas, you can calculate the maximum allowable. As an investor, you want to have at least a 30% cushion if your intention is to turn around and sell the house. So, the calculation would be: 1. ARV multiplied by 70% equals the all-in price 2. All-in price minus Repairs equals what you should pay for the house Don’t forget to consider the holding cost on the house as well. Get it done quickly so you can get out of the deal and on to the next one. RENT INCOME CONSIDERATIONS Should current or future rent income be considered when buying an investment property? Yes, rent income is a crucial consideration when you buy invest - ment property. The income plays a significant role in determining the potential probability and your
and consistent rental income helps mitigate the risk of any investment property. Saving any overage/profit to cover future vacancies and repairs is wise. Determining the rental income is just a phone call away. Call any property manager and ask them if they were to list this house for rent, how much would they rent it for?
flow looks like as it pertains to mortgage payments, property taxes, insurance, maintenance, and vacancy costs. 2. Loan qualification. For long-term financing options, rent income is the basis on which your loan is made. 3. Property evaluation. For 1-4 fam - ily and commercial properties, rent determines the value of the property. True investment prop - erties are based off the return on investment. If you are buying for the appreciation only, you are buying for the cherry on top. For some people, future wealth is their only goal, but be prepared to make up the deficit monthly.
HARD MONEY VS. PRIVATE MONEY
Here are the key differences between the hard money and private money. Hard money refers to loans provided by private lenders or
companies that are typically secured by real estate. These lenders tend to focus on the collateral value of the property rather than on the borrower’s credit worthiness.
4. Risk mitigation. Rental income acts as a buffer
return on investment (ROI). 1. Cash flow. You need to
during periods of vacancy or economic downturns. Reliable
understand what your cash
44 :: INVESTOR REVIEW :: JUL-AUG 2023
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