Rental Properties: The (Real) Real Estate Rebound
Louis Basenese and I have been pounding the table for months: Real estate has bottomed out and it’s time to take advantage.
Yet, while prices are at or near historic lows, not everyone agrees. Many claim that we still have a ways to go before the rebound hits.
They make the point that although foreclosures are dwindling, there are stragglers in the pipeline.
They claim that while there’s been some recovery in the economy, if it doesn’t pan out, another wave of distressed homeowners is going to drag real estate prices down even further…
I doubt it. But that aside, there’s no point in debating because as far as investing is concerned, the outcome is irrelevant.
Why? Real estate is so ridiculously cheap at the moment that it doesn’t matter one bit what happens with the market over the next couple of years.
Now’s the Time to Buy Real Estate… Period
There’s no doubt that when it comes to real estate, I live in one of the hardest hit states: Florida.
And I’m not idly waiting around for prices to (maybe) drop further.
You see, for the last couple of years, I’ve been scooping up rental properties.
Not because I had hopes of becoming a landlord, mind you. Instead, I started off buying a place for my college-bound daughter to stay while she was at school.
The problem was, the moment I thought she decided on a location, she changed her mind. Then again… and again after that.
I know, I should have known better. But on the other hand, I’m convinced that her indecisiveness will serve me well in the end.
As it turns out, visiting colleges with her gave me a chance to closely research properties and neighborhoods.
And one thing is certain: Rental properties around educational institutions are in high demand.
Still, I’m not scooping up just any such rentals. There are a couple important guidelines I consider:
- I make sure the condo associations are over-funded and the occupancy rates are above 90%. Actual owner occupancy must exceed 70%, too.
- I’ll only buy in locations where I would feel comfortable living myself. That makes marketing the properties much easier.
It’s also important to note that buying these properties isn’t easy.
The banks that own them won’t finance them. And other banks don’t make financing any easier, either. In other words, in this market, cash is king.
It pays off in the end, too. Big time.
Each property that I bought or am in the process of buying costs between $45 and $55 per square foot, including closing costs. On top of that, I pay about $350 a month in maintenance fees and taxes per property.
That’s it.
At current levels, after paying the monthly fees and property taxes, that makes my rate of return about 10%.
No profit in real estate? Better wait around and see what happens? Please. There’s astounding profit to be had in the market right now.
Bottom line: Louis and I are both convinced that the “real” real estate rebound is about to hit. And when it does, I’ll embrace my new role as landlord and rake in the profits along the way. While investors waiting around for housing prices to dip a bit more will surely be left in the dust.
Ahead of the tape,
Karim Rahemtulla
Related Topics: Real Estate, Think Contrarian
Karim, You need the tell the other side of the story about the pit falls of being a landlord . It’s fine if you have a good tenant
and they pay the rent. Lets say you get a real “stiff” who knows how to play the system, and beats you out of 4 to 6 months rent before you can get the guy out. Leaving you with the task of having to make up the loss out of your own pocket. “OUCH” !!!!
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ask for 3 months advance and after 1 mo .unpaid rent send eviction notice before the start of the second month and and evict before te end of the se cond mo, the third mo. rent left is for security and repair and clean , better he sues if he want what is left than you left holdng the bag.
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