Sometimes real estate agents actually have time to look at real estate for themselves.  It’s true.  Believe it or not.  We just closed our 20th transaction of 2008 last week, and we had a day to exhale.  So what did we do with our couple hours of solace?  Lesley and I perused rental property, of course.  And why not?  Rates are pushing towards 5.5%.  Inventory is still high at over 12 months’ worth.  The winter months are upon us when everyone is expecting slower activity.  I honestly believe that lower offers will be considered during this time because the likely alternative for sellers is waiting until the spring when the wave of buyers wakes up and hops in the car with agents.  I expect the Spring to be a different market for the better in our industry, which leaves us in a deep valley through the cold winter.

Do we need a second home?  Do we need a rental property?  Of course not.  Real estate investing takes a lot more time than traditional investment paths.  However, when you consider dumping your money in the topsy turvy stock market or hiding it in a low yielding money market account, real estate investing looks more and more favorable.  Right this minute you can buy with as little as 5% down and cash flow a property on a rental.  Are we all crazy for not considering it?   The valley won’t last.

So, what does a good rental property look like?  How do you find them?  Thanks to a recent article in AJC from John Adams.  Here’s an exceprt that gives a great roadmap:

Prime candidates for a rental program would be houses that were less than 10 years old and have recently been through the foreclosure process. Because of the slow-selling market and the bad loan on the house, it now is being marketed as a “bank-owned” home. Most lenders require that buyers accept their foreclosures in “as-is” condition, and that the lender not be required to disclose any defects or problem areas. Because these preconditions are unacceptable to today’s picky retail buyers, the banks have been forced to lower their prices on many of these houses.

Today’s ideal rental house would have three bedrooms and two baths, would be purchased for well under $100,000, would require less than $10,000 in repairs, and would be located in a neighborhood of primarily owner-occupants. Proximity to a major employer would be icing on the cake. Such a house could be purchased and repaired, then placed in service with rent approaching $1,000 per month. Then the investor could recoup his total investment in a new fixed-rate loan, and still end up with a monthly profit of $200 or more.

Unfortunately, recent Fannie Mae restrictions have prevented the majority of experienced investors from participating in this activity. These restrictions have slowed the absorption of foreclosed homes in the Atlanta residential market. Specifically, no applicant for a rental property mortgage can be approved if the applicant already shows four or more home loans on his credit report.

The moral of the story?  Don’t have more than 3 rental properties.  Just kidding.  The moral of the story is make sure you purchase a home that cash flows.  There are plenty of avenues for consumers to find these opportunities.  A great place to start is our Home Page > Find a Home > Search.  For a more detailed search, Lesley or myself would be happy to set you up using one of our tools called “Client Gateway.”  Client Gateway is an automated search using criteria you determine where the lastest listings that meet the need are automatically emailed to you.  We find this tool to be incredibly helpful for clients who are specific in their search and need to drill down a little bit more than the typical web searches.

Don’t be afraid to at least look at what’s out there.  I can assure you that the real estate investor community is looking, and that includes these real estate agents.  Happy hunting, and let us know how we can help.

This entry was posted on Monday, November 24th, 2008 at 5:13 pm and is filed under Financial, Home Tips, Investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.