Choosing a Rental Market with American-Based Infrastructure

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If you're looking for a great rental market, it's important that you consider what types of jobs are available in that city. If your tenants don't have work, they'll be unlikely to pay their rent. That doesn't sound like positive cash flow to me! 

I look for something very specific when it comes to choosing a rental market—I love average cities. Chain restaurants, long-haul trucking, hospitals, airports, universities, and distribution centers are all businesses I like in my rental markets. Think specifically about jobs that are not going overseas. Where there is job stability, you don’t have to worry as much.

I know we hear all the doom and gloom about the jobs market across the United States but the reality is much different. In fact, my favorite rental markets have very strong local economies with jobs that cannot be outsourced to other countries. These jobs are central to the US economy. In my favorite rental markets I didn't see one dip in my rental income during the Great Recession.

When you rent your property to the local post office worker or nurse, they're not likely to lose their jobs. These types of companies simply do not lay off these types of workers. It's A class neighborhoods that are largely effected by economic collapse. 

To hear more about what I look for in a rental market, check out on of our early podcast episodes on rental markets! In addition to American-based infrastructure, you'll learn about the importance of low taxes, vacancy rates, and more! 

 If you're looking for a great rental market to invest in, it's important that you consider a few very specific things.

The Truth About A Class Neighborhoods

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An A class property is typically a big, fancy home in a great neighborhood. It could also be an apartment in a high rise in a city like New York, Chicago, Austin, or Miami. A single-family in an A class neighborhood would sell for hundreds of thousands of dollars. You can expect a variety of bells and whistles like garages and central air in this type of residence. Since the price is so high, you could potentially bring in thousands of dollars in rent per month. 

I know what you’re thinking: “Higher rent means more income!” Not so fast. The ROI is actually lower in an A neighborhood, because the up-front cost is so high. And not to mention, A class properties typically are the biggest headaches for investors! It’s counterintuitive, but tenants in an A property have much higher standards, and need more maintenance and attention.

Think about all of those bells and whistles I mentioned. More amenities = more upkeep! In an A class property you have to worry about things like fixing garage doors. I like to say that A class properties make for A class problems. 

Also, an A neighborhood is going to be most affected by a recession than any other neighborhood. Tenants with higher incomes are more likely to lose their jobs when the economy is down. If you’re looking to earn a steady, passive income, you’ll want to consider this before purchasing an A property.

We suggest centering the bulk of your portfolio around C class properties. In C class neighborhoods, the demand for rentals is ever present. C class neighborhoods are full of hardworking, blue-collar Americans who hold steady employment. To learn more about the merits of C class neighborhoods, check out this podcast episode! 

 The truth about A Class neighborhoods (when it comes to investing in rental property)

The Best Neighborhoods for Real Estate Investing

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If you're new to real estate investing, I know it can be confusing to nail down the perfect rental market, and then the perfect neighborhood! My personal strategy is to purchase my properties in C class neighborhoods. The properties can be acquired for cheaper than B neighborhoods, and the rents are comparable. Therefore, the return on investment is higher. Simply put, it’s a better value. Remember, that’s why we do what we do! It’s all about ROI.

A lot of people worry about the quality of tenant in a C neighborhood, but truthfully, I rarely have issues with my tenants. These are hardworking, blue-collar Americans. They are satisfied with the homes that my team renovates. The neighborhoods are quiet during the day, because the tenants are away at work.

Not to mention, I don’t communicate with my tenants anyway! All of my properties are in the hands of effective property management teams. Should a problem arise, the property management team handles it quickly and professionally.

It might seem counterintuitive, but A neighborhoods are typically the neighborhoods that have problem tenants. Those tenants have higher standards, and are more likely to complain about insignificant details.

If you want to know more about C class neighborhoods, check out my property tours on YouTube! I'll walk you through some of my favorite neighborhoods, and show you exactly what to look for in the perfect rental market! 

Interested in picking up your very own C class property with high ROI? Let’s talk! Pick a 30-minute time slot that works with your schedule, and we’ll match you with a great property!

 If you're new to real estate investing, I know it can be confusing to nail down the perfect rental market, and then the perfect neighborhood! Here's my strategy.

7 Qualities of a Great Rental Market

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When you're searching for a great rental market, not just any city will do. And unless you live in a few select markets, chances are the best properties are not in your backyard.  So how do you go about finding a rental market that will produce high return on investment? Here's a checklist that I run through to ensure that I've found an effective rental market that will allow me to bring in cash flow!

  1. Vacancy rate. This is important because a vacancy has the potential to be your biggest cost. Tenant turnovers are inevitable, but you have to consider how long it will take to get a new tenant into the property. Every month without a tenant is a month you aren’t collecting rent. Your goal should be to invest in markets where properties are quickly and consistently rented. Personally, I like a vacancy rate of about 5%.
  2. Taxes.  I like to purchase my investment properties in states where property taxes are low, just a few hundred dollars per year. Remember, every expense comes out of your bottom line, and taxes are no exception.
  3. American-based infrastructure. I love average cities. Chain restaurants, long-haul trucking, hospitals, airports, universities, and distribution centers are all businesses I like in my rental markets. Think specifically about jobs that are not going overseas. Where there is job stability, you don’t have to worry as much in a recession.  
  4. Lack of flood zones. If your investment is located in a flood zone, you’ll have an additional expense—flood insurance. And if a natural disaster does occur, your investments are gone. I don’t like that risk, and I don’t like that added expense.  
  5. Affordable labor. I'm not interested in overpaying for labor. I'm able to find affordable labor by developing relationships with contractors. I provide my team with consistent work, and they work for a fair wage. It’s a win-win for everyone. 
  6. Low cost of homes.  Economically, it doesn’t make sense to acquire a rental home in a place like California. I can get the same home for at least half the cost in the Midwestern markets that I like. This way, I can purchase more investments and achieve that Freedom Number!
  7. Low crime rate. I want my tenants to feel safe in their homes. Remember, you can’t exclusively go off of crime data websites to get the full picture. Here are the five rental markets with the highest crime rates!

Don't want to get out there and look for the right market? That's what we're here for! You can learn more about our process here. 

 How do you go about finding a rental market that will produce high return on investment? Here's a checklist that I run through to ensure that I've found an effective rental market that will allow me to bring in cash flow! | real estate investing | rental properties

Why You Should Invest Out of State

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When I mention that I purchase properties in the $40-50k range, sometimes people respond, “You’re so lucky! Homes in my area are over $200k!” But the thing is, I don’t invest in my home state of New Jersey.

The price to acquire rental properties in New Jersey is sky high! The property taxes are astronomical, and it takes a lot of time and money to rehab an even remotely affordable home.

Additionally, these properties aren’t worthwhile because return on investment is low. This is not the way to build wealth. You can't be a successful and profitable real estate investor without a certain ROI.

Properties in my area are simply bad investments. The cost to acquire is too high, and the taxes are outrageous. In my research, I’ve found that the ROI in New Jersey isn’t lucrative. If I want to build legacy wealth, I have to acquire properties with a high ROI.

Therefore, I always purchase my properties outside of New Jersey, and in my experience, it’s perfectly safe. If you're intimidated by purchasing properties so far from home, be sure to listen to this podcast episode where I discussed the safety of purchasing across state lines. 

If you want to start building a passive income, you have to go where you’ll earn the highest return on investment. Unless you just happen to live in one of the best rental markets, you'll probably have to leave your comfort zone, and look for properties in different markets.

In my experience, the best way to build a profitable and robust portfolio is to invest in the best rental markets in the US where ROI is high, and risk is low. Check out our 7-step guide to purchasing rental properties out of state!

 Unless you just happen to live in one of the best rental markets, you'll probably have to leave your comfort zone, and look for properties in different markets.

Best of the Blog - Top Ten Posts

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5 Must-Read Books for Real Estate Investors – Our most popular blog post ever operates on the basis that you don’t need to read every single investing book on the market to be successful. I’ve collected 5 must read books about the best investing strategies, taxes, and business principles to help you jump-start your investing venture!

5 Most Landlord Friendly States - Before purchasing a rental property, you’ll want to be informed on how lease agreements, security deposits, and evictions will be handled in that state. The implications can be substantial, so you don’t want to overlook this list!

How to Secure Funds to Purchase Rental Properties at Zero Percent Interest - It’s not often that I find a rental strategy so incredible that I HAVE to share it. If you’re looking for a way to purchase a rental property, whether it’s your first or hundredth, this strategy can help you grow your portfolio.

How to Invest in Real Estate with None of Your Own Money – This post is one of our oldest, but it’s timeless! If you want to invest in real estate but you don’t have money, this blog post is for you!

10 Tax Deductions for Real Estate Investors - My favorite tax accountant Tom Wheelwright likes to say, “if you’re a real estate investor and you’re paying taxes, then you’re doing something wrong!” One of the top benefits of real estate investing is the enormous overall implication on your tax burden. This post outlines five tax deductions you’ll want to consider!  

The Real Estate Investor’s Guide to: The 4-Hour Workweek by Tim Ferriss - New York Times Bestseller, The 4-Hour Workweek by Tim Ferriss is chock-full of useful information about living a deliberate lifestyle, and allocating time intentionally. This aligns perfectly with real estate investing. As you know, real estate investing is the best way to earn passive income and attain financial freedom.

The Real Estate Investor’s Guide to: Rich Dad Poor Dad - Many successful investors who I’ve interviewed for the Investing in Real Estate Podcast have something in common—they struck inspiration after reading Rich Dad Poor Dad by Robert T. Kiyosaki. If you’ve read the book, this should come as no surprise. In fact, it’s touted as the #1 personal finance book of all time. Check out this post to hear why this book is the guidepost for real estate investors.

How to Replace a $70,000 Salary with Passive Income through Real Estate Investing - What if you could replace your salary from your 9-5 job with passive income through real estate investing? You might think this sounds like a tall order, but it’s actually quite attainable. I’ve done it, and I’ve watched other investors do it too. All you have to do is follow a simple formula, and you’ll be earning a passive income in no time!

Flipping Houses vs. Owning Rental Properties - Flipping houses and owning buy and hold rental properties are two of the most popular real estate strategies. These two strategies work very differently, and generally I recommend that you choose one path. This post is designed to help you choose the right strategy for your lifestyle.

How to Evaluate Debt Service on a Rental Property – One question we always get is, “how do I maintain positive cash flow if I have to pay back my loans?” If you’re financing a rental property, you’ll want to make sure your deal covers those expenses! This blog post is here to help! Bonus: free spreadsheet included! 

 If you're a real estate investor (or thinking of learning about real estate investing) these are a must read!

Three Steps to Making a High Return Real Estate Investment

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There are two kinds of investors: those who make a high return on investment, and those who make a low return on investment. It’s important that you realize the importance of making a high return, and identify exactly how to make a high return on your rental property.

I spend a lot of time talking to investors. Most people realize the value of investing in real estate, but they just don’t know where to begin. I’ve heard from so many people who are otherwise successful, but they’ve made a real estate investment that isn’t profitable! If you begin by calling up a realtor and investing in the city you live in, chances are you won’t receive a high return.

If you want to become a high return real estate investor, there’s a foolproof strategy you have to follow. It’s nothing fancy, just a very straightforward number of qualities you need to look for in an investment.

  1. Find wholesale properties. If you purchase a piece of real estate at market value, it will be increasingly hard to make a high return. When you stay below the market value, you’re going to receive high ROI. Buying rental real estate off market is key! 
  2. Find the right location. Purchasing properties in states like California or New York is going to come at a high price tag. Remember, the cutoff point for the rental value keeping up with the purchase price is about $125k. But to get the most bang for your buck, you still want to be below that amount. Don’t overpay for a property.
  3. Collect consistent rent. Whether you use my ROI formula or the 1% Rule, you need to run the numbers and make sure that everything makes sense before you purchase a property.

It's as simple as that! As long as you take the time to find the right property in the right market, with high ROI, you'll bring in consistent passive income for years to come. 

Don't want to do it yourself? Our turnkey properties will bring you double digit ROI! Click here to book a free call with our team. 

 There are two kinds of investors: those who make a high return on investment, and those who make a low return on investment. It’s important that you realize the importance of making a high return, and identify exactly how to make a high return