In most cases, passive real estate investors aren’t in it solely for cash flow. One of the best reasons to invest in SFRs is simple: you reap rewards from cash flow, appreciation, and tax benefits. The taxes, in fact, are one of the main reasons people choose real estate!
But what are those benefits? And what should investors look for in individual investment markets? After all, local and state taxes can significantly impact the effectiveness of these policies. Here’s what you need to know!
Though passive investors may not be involved in the day-to-day operations of their rental properties, they have plenty of responsibilities. One such responsibility is in managing and maximizing cash flow. This task starts from the outset as you weigh the cost of a rental property and its ongoing expenses against cash flow potential. But it doesn’t end there!
Those ongoing costs tend to increase over time – and part of your job is mitigating those increases to best preserve and maximize passive income.
Further Reading: Top Tips for Increasing the Profitability of Your Investment Properties
Resident retention is the investor’s best avenue to reliable cash flow. Vacancies cost money – costs for lost rental income, preparing for the next resident, and marketing the property, to name a few! As a real estate investor, one of your top priorities – regardless of your strategy – is to keep good residents for the long haul.
But how do we do that? What do retention rates mean? How are they calculated? Keep reading to find out more!
We can talk about metrics all day, but they’re useless if we don’t understand how to calculate and interpret the data! Generally speaking, your rental property retention rate is calculated by dividing the number of residents (or renter households) that moved out during a twelve-month period by the total number of residents/households you had over that same period. Then, multiply that result by 100.
Mortgage rates are the highest they’ve been since the Great Recession. Current 30-year fixed rates hover in the 6 to 7% range. Historically speaking, that’s nowhere near the highest they’ve been (that title belongs to the average in October of 1981 at a sickening 18.82%. Yikes!), but current rates are coming off all-time lows in 2020 and 2021.
With home prices higher than ever, it is no surprise that homebuyers are waiting patiently for mortgage rates to come down and ease sticker shock. After all, the higher the asking price, the more the percentage matters.
But is it wise to wait for rates to drop?
We think not. As real estate investors, you risk more in the wait than in taking the chance in the market as it is. Here’s why:
If you want to lose your mind, try to keep up with all the predictions being made about the real estate market. Doing so is exhausting. Even if some interpretations and predictions have merit, they’re just that – predictions. In many ways, the headlines are designed to scare us. Navigating news on the real estate market is frustrating: full of mixed messages and emotionally charged rhetoric.
And for every opinion you see, you’ll find one to counter it.
So, how do we move forward without fear as real estate investors? After all, we don't have time to be paralyzed by every doom-and-gloom headline. You're in luck - here are the secrets to fearless real estate investing.
Investing out-of-state is one of the best things a passive real estate investor can do for their portfolio. After all, investing beyond your local market comes with some distinct advantages, such as:
In the real estate world, there’s almost always someone talking about a housing bubble. But what exactly is it? What causes it? And what happens after the bubble bursts?
When investing in real estate, some risks are obvious. Others? Less so. Effective risk management involves recognizing and mitigating all risks, from the common to the rare. Are the chances slim? Sure. But you’ll be kicking yourself if you don’t do your due diligence in handling these sneaky buy-and-hold real estate investing risks!
Investors – ourselves included – often refer to “financial freedom.” While the concept itself sounds reasonably straightforward, it can mean many things to different people. These ideas lead to diverging goals and priorities. Ultimately, those points of divergence demand unique investment strategies. What you do hinges on where you want to be.
Is your real estate market overpriced? Navigating today’s housing market isn’t easy. Though inventory is going up and mortgage rates are going down, property prices are still sky-high. For the real estate investor, it’s pretty easy to assess your local market. Things get tougher as you go further afield.
