- Pay careful attention to 3 key areas
- Income
- Expenses
- Financing
- Run the numbers BEFORE buying
- Cash-flow analysis before and after taxes
- Tax Savings or Liability
- Project the cash-flow for the holding period
- Disposition plan and overall investment performance over the holding period
- FMRR – Financial Management Rate of Return is a system to capture a the points listed above. I have put together a spreadsheet to do so. Please call to learn more about getting a copy.
- Select
- An appreciable area – a well-maintained neighborhood
- A low maintenance property
- A property desirable by most people
- Know the percentage of rentals (condos only) in the area – competition, financing restrictions
- A good lender would advise you on all available financing options
- Valuate the property based on several indicators taking into account expenses, taxes, financing
- Once you purchased the property
- Evaluate the rate of return (equity analysis) on your investment every year
- Depending on your objective, may want to move your equity when the return drops below a certain rate
- IRS Publication 527 Residential Rental Property (including vacation homes) http://www.irs.gov/pub/irs-pdf/p527.pdf
- Have a professional on your side. Work with a knowledgeable real estate agent that helps the individuals every day of the week.
