Part one

We cover the basics of real estate investing and provide an overview of the different strategies and opportunities available. Whether you're just getting started or looking to expand your real estate investment knowledge, this vlog is a great resource for anyone interested in building wealth through real estate investing. (Part One of Two)

More of a reader? Catch the video transcript below!

Hey, guys! Welcome to Part One of my Ultimate Real Estate Investing Guide.

Today, we’re talking all about rental properties. If you’re looking to invest in real estate and have some cash flow, buying rental properties might be a good option.

What are some of the things that we have to look for?

What to Look For When Investing in Rental Properties

The Area

One of the most important factors to consider when looking for the right rental property to invest in is the area.

You’re going to want to look at the demographics of the area, who lives there, what kind of tenant is going to rent this place, what kind of job they have, their median income, and the vacancy rate. Each of these factors is going to be different from community to community and city to city, so you really want to understand who your prototypical tenant is and what the local economy is like.

Something else to consider when it comes to the area is how quickly rents appreciate. Are there any new jobs and opportunities coming to the area soon? There may be an area that is underperforming right now, but the minute Amazon or Google moves their campus into that area, it can completely change the demographic.

The Condition

So, you’ve looked at the demographics, economics, and future development of the area and it all checks out. The next thing you want to consider is the condition.

Now, there are two ways to go about this: you can buy something that’s turn-key and ready to go or a property that you can fix and flip.

With a turn-key property, it’s going to be ready to go and in good shape. You’ll pay a higher price for the property, but you’ll have fewer headaches and repairs.

On the flip side, you might find a similar property in the same area for much less, but maybe the rents have been low for a long time, and maybe the building is dilapidated and could use some fixing up. You’ll take on more risk and have more headaches, but if you can fix up the property and raise the rents, you stand to make a pretty profit.

Appreciation

If you look at San Diego, there’s such a high demand here. People are willing to pay high prices for properties, and it’s really hard to find a really high cash-flow-producing property right out of the gate.

You want more cash flow, so you should invest in a property in a different metro area, right? Not necessarily. The appreciation rate is so high in San Diego that even though you’re cash glowing less per month, you can end up getting more returns in the long run.

Financing

Another factor to consider is financing.

I have VA buyers who can buy up to a four-unit building with zero money down, live in one of the units, and collect rent from all the others.

With an FHA loan, you can put 3.5% down on a four-unit building, live in one unit, and collect rent from the three others.

Maybe it’s not gigantic cash-on-cash returns, but you could get your monthly payment covered at the least. As rents increase, that could end up turning into a positive cash flow situation over a long period of time.

So, whether you put down 20%, 3%, or 0%, the point is that we want to make sure that we are structuring the financing in such a way that helps you meet your personal goals. Again, for some people, that’s going to be cash flow. For others, it might be appreciation or simply getting their monthly payment covered.

As always, make sure you get with your trusted real estate professional. If you’re in San Diego, give us a call and we can walk you through the different options that you have when you’re thinking about buying a rental property. We can make sure that whatever financing you choose and whatever metric you’re after, we can put something together that works for you!

See you in Part Two!

Brent Edwards (aka Brent the Broker) is a residential real estate agent and Realtor in San Diego, CA who helps clients buy and sell homes in San Diego, California and all surrounding areas. Brent is a highly-recommended Realtor in San Diego by family, friends and past clients. Call Brent today at 619-550-8070 if you have any questions about real estate in San Diego or you'd like to buy or sell a home.