Buying Rental Properties--Cautions

Lots of people know what a good investment real estate can be to a portfolio of paper investments that bring in monthly income. It's true that a real estate holding in rental properties can be a pretty secure investment if done correctly. Real estate has always been subject to interest rate movements that happen over several years. In low interest rate years properties generally go on the market at elevated prices; in high interest rate years the prices decline to get buyers to swallow the higher prices paid for the offers. Today's market is on a cusp of potential lower prices due to foreclosures and economic fears that are outside of the realities of a particular market. Recently, the fears of a housing bubble and the slowdown in building has brought many prices down in a lot of areas. Someone wanting to pick up some houses at good prices with still low interest rates may do quite well, but it could be a bloodbath for the uninitiated.

The general axiom holds true in buying real estate for an investment rental portfolio. Buy low and sell high. But you're not buying to flip or trade, right? Then the first part of the axiom still holds true--buy low. Be warned that the vultures and scammers are out in full force in this market and a shopper for good rental real estate is game for all of these shysters. Just know where to look. We've all been hammered with ads over the Internet, newspapers, and flyers stuck to phone poles saying "We buy Ugly Houses, any condition, any shape." Nobody with the sense of a worm would fall for these ads, right? Nope. Many people, including some supposedly savvy realtors themselves do make that first call, then get sucked into all sorts of idiotic purchase deals. If you're looking to buy rental property these sources are usually are very worst places to find them.

Start looking for properties in areas with good rental histories. It's not easy to find them, but narrow any search by focusing on areas around medical centers or universities. It's guaranteed that these places have provided good, stable rental opportunities for students for a very long time. University areas are the main locales of good rental properties since the prospective tenants usually have long-term goals with regard to education and future plans with respect to their careers and employment opportunities. They tend to pay their bills on time because they don't want their credit blemished. This market is the best of the best, when it comes to tenant quality. I'd suggest that people who live in large cities look for the most expensive schools in the area and range out from where they're located. You're looking for prime rental properties in the areas that will least likely attract tenants that will stiff you or take you to court-- properties that will MAKE YOU MONEY.

Do MLS searches for the price comparisons. If you don't have access to MLS, engage a good realtor who does. You won't be paying a thing for him/her to search duplexes or quadraplexes in the area because they don't get a commission until the sale is closed. A dedicated and loyal real estate agent is your best tool in any search for cheap rental property on the market. Ask your realtor to look up and print out public school and crime statistics for the area. This is crucial for anyone who wants to attract the best quality tenant to his or her property. Sometimes people look for school statistics, crime rates. etc. on their own. Do some google searches for these types of statistics and then get printouts of these. Put them in a folder for consideration when buying and for potential tenant attraction after you've purchased a property. A good renter or lease-holder wants the same thing things any property owner wants--safety, good parks, access t transportation, pretty landscaping, good neighbors, and so on ad infinitum.

HUD foreclosures sometimes offer great deals on bargain purchases. There are a number of sites on the web to access them. Most cost a weekly or monthly fee to access and require a realtor for the purchase. There is also a free foreclosure search engine at http://www.foreclosurefreesearch.com/. Don't fall for some of the scams that take you to listings of these properties for a fee. They're not worth what they charge. . You can go to any local HUD web site and find out what properties are legitimately listed for sale or, better yet, ask a good realtor to look for you. Use the free search site above or contact your realtor. The commissions realtors get for closing foreclosure sales are often more than they regularly receive, so they will work with you if they know that you're serious about looking for and purchasing good properties.

Sometimes a good deal comes up listed by owner, a FSBO. It's not likely, because these people most often price their homes too high, but occasionally it will happen. Negotiate with FSBOs cordially. If a property appeals to you, approach the owner cordially and meet him/her over coffee or at some venue that's casual. People just want to sell their properties and you just want to buy at the lowest price acceptible to them. That is not an area of contention, just an area of negotiation, and both parties know it.