Smaller, investment similarities, often, offer, meaningful financial/ economic benefits, in terms of creating a combination of asset growth, return – on – investment, and some degree of safety! However, this is true, only, if, the purchaser, first, thoroughly, understands, what to seek, and why! Different possible similarities, have, varying, possible, for optimal performance, etc! While, everyone, cannot, consistently, take care of, provide, or get involved, in major real estate deals/ purchases, far more, are able to take advantage of smaller similarities, etc. These vehicles, often, include, one, to four, family/ unit, houses, and, while some, offer, attractive investments, others, may not, always! With, that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, 4 meaningful, meaningful, main/ basic considerations, and evaluations.
1. Cash flow: Cash flow, when it comes to these, usually, refers to, the difference, between, the funds/ revenues, received, and the monthly costs. It is important to consider these, in a conservative manner, by, basing evaluations, not, on the highest, possible rent – rolls, but, by market – based rents, and, no more than 75% occupancy (to avoid, a possible, cash – grind, if there are any interruptions, due to a variety of possibilities/ contingencies). In addition, the investor, must, be careful, to ensure, his personal cash flow, doesn’t suffer, by using too high a percentage of his reserves, for up – front costs, in addition as creating reserves, etc!
2. Area/ neighborhood/ local market: Before, making – the – jump, thoroughly, consider, and estimate, local real estate market conditions, and discover, the marketplace, for rentals, in terms of, availability, need, advantages, and/ or, disadvantages! Thoroughly, know the specific area, and determine, if it offers, the best scenario, for you, and your priorities and purposes!
3. The 6% Rule: Many pay close attention to, what is often, referred to, as the 6% Rule, when it comes, to purchasing, smaller, investment similarities. This method, three – quarters, of a realistic rent – roll, must unprotected to, at the minimum, a six percent profit. Expenses, must include: mortgage – related expenses, including principal, interest, taxes, and escrow; landlord – paid utilities; repairs; renovations; upgrades, and reserves, etc.
4. character condition: Understand, the existing condition, of the subject character, and, what, will need to be addressed, closest, on an intermediate – basis, and in the longer – run. save funds, must be used, and prepared, for as many contingencies, as foreseeable, etc! however, don’t be, overly – influenced, by staging, and overestimating, rent – rolls!
After, over 15 years, as a Real Estate Licensed Salesperson, in the State of New York, I believe, strongly, in the possibilities, and advantages of investing in smaller, investment similarities, but, only, when, this is done, carefully, and in a focused manner! The smarter, you proceed, the better – off, you will be!