Find low-risk investment rental housing opportunities

In general, low risk is not part of the high return investment formula. However, the current rental housing market offers a possible exception. The housing slump is creating rental investment opportunities that should provide superior returns for years to come. My personal favorite areas to look at are condos, townhomes, and multi-family properties. Many of these residential rental opportunities have seen their values ​​crushed. Even better, recent legislation and US government funding will force a large number of these homes onto the market in the coming months. Combine this with a number of mortgage resets on the horizon and the opportunity for potentially even better values ​​is very real.

In a real-world example I’m familiar with, a young college graduate completed the purchase of a condo at a price that will cover the mortgage simply by renting a single room.

In the Washington, DC market, one of the least damaged by the events and where occupancy remains high, you can buy condos and townhomes that will generate 8% to 15% annual return on cash investment. These are homes in prime locations with excellent local transportation and sustained neighborhood strength for decades.

Enough of the examples, the investor should be looking for projects that offer the following characteristics:

  • Strong neighborhoods with excellent shopping, services, schools, transportation, and employment,
  • Physical structures that promise minimal maintenance (one of the reasons I like condos is that your liability is limited to the interior only),
  • Possible seller financing options,
  • Short sale price reductions,
  • foreclosure auctions,
  • tax sales

Then you should take the time to see what the plans of government officials are for development and employment in the area. Finally, take the time to verify the initial conclusions you have made about the neighborhood. The neighborhood must be strong and empowering.

Finally, don’t walk away because it takes a cash purchase. Other people’s money does not necessarily mean bank debt. In today’s economic environment, you may be buying with investor capital and generating your profits from the management and development effort you put into an opportunity.

Savvy investors who notice the trends outlined above will be rewarded for finding and taking advantage of these opportunities as the restrained new construction of the last two years takes hold in the form of increased rental demand in the coming years. , further increasing their yields. There has never been a better time to complete a residential rental acquisition. Today’s relatively strong returns are likely to multiply like traditional loan returns, allowing for more normal leverage levels and increasing the income-to-investment ratio.

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