What is your strategy?

I often hear people classifying properties in classes A,B, or C. That would be true in some cases, but not always. Finding a good tenant is more important than having a class A property if you plan to buy and hold.

What is your strategy for investment? Are you looking for a property for cash flow long term hold for your retirement? Are you planning to rent the house until the value goes up enough to sell? Depending on your strategy, your investment choice will differ.

  • 1% rule, 2% rule. Have you thought about 3% rule? 
  • The 1% rule is this: if you buy a property for $100,000, your monthly rent collected should be $1,000. That is the 1% rule that most investors are trying to catch (if they are lucky in today's housing market). The 2% rule (where your monthly rent is $2000 for a $100,000 property) is claimed to be a myth by many investors. They say that it is not possible unless the property is a junker. However, Is it true?

When you choose your property for investment

Look for signs

  • How's the smell? Does it smell musty? If so, your future tenants will smell it as well and there will not be much you can do when your tenants complain about it. Musty smell often is a sign of a water problem.
  • Don't forget to check the electric panel. Older homes often have 60 amp (with fuse). It will cost over $5,000 to upgrade to 100 amp if you use a good company.
  • Check for smoke detectors and carbon monoxide alarms. Also check if there is a GFCI near sinks. Why? The presence of these items will show the extent of care from the current owner. They are small signs of the condition of the house.
  • When you inspect the basement, check carefully to see if there is any bowing or any sign of water seepage. While it is not impossible to fix these problems by yourself, doing so is extremely difficult.
  • Ask neighbors about the house; I always do this. Often times they can tell you A LOT about the condition of the house (it helps to have a list of questions ready).
  • Run the water to check the plumbing and the strength of the water pressure.
  • Avoid houses located deep inside of residential areas if you are looking for class B or C homes. Buy something closer to the main roads if possible.