Property Purchase
Price & Terms
Many new investors make the mistake of buying "bargain" property for rental housing - because that is what the man on TV told them to do - without understanding why tenants choose the location they want to live in, and the kind of home they want to rent.
To get good tenants you must own decent, safe and affordable housing in areas where people want to live. Schools, transportation, shopping, churches and jobs all affect the amount of rent a tenant will be willing to pay to live in your property. And that determines the price you can pay for a rental property.
When investors buy a property just because it is priced $10,000 to $20,000 below market value, they often learn too late why it was priced so low.
Don't get caught up in the most common mistake made by inexperienced investors; when you become blinded by the "good deal" you are about to make, you usually don't see the rest of the story.
Here are several criteria for determining what price you can afford to pay for income producing property:
- The Net Operating Income
- Potential for Increasing Income
- Condition of the Property
- Rental Market Conditions
- Terms
- Resale Value (market value)
- Tax ramifications
- Determining Value
The above topic is discussed in our members' only Property Purchase Price page.
Also see: RHOL Members Investor Web for more extensive and detailed information and RHOL's CornerStone University for a complete e-course on determining value of real estate investments. |