Many Real Estate Investors become Real Estate Investors because of the freedom it gives them.
Especially when that freedom involves passive income that allows them to not only make money without having to work, but gives them the time to follow their passions and be with their family. Not only that, this passive income lets them retire early and avoid being dependent on a job for income. This is why passive income is so powerful.
Within Real Estate, there is multiple ways to build passive income such as owning notes, lending hard money, and more. But the easiest and most accessible to the average investor is the Buy N’ Hold. This is the easiest and most accessible because it needs the least amount of capital, is fairly simple to understand as all you have to do is buy, rent, and sell a home when the market is right, and is the easiest to make hands-off as there is a plethora of property managers who can make you your money so you don’t have to.
Buy N’ Holds are very simple. The hardest part is purchasing them right. Which is the first step in purchasing a Buy N’ Hold (Rental) Property. Of the many aspects you need to know to find a good rental property, the most important three are Rental Prices in the area, Purchase Price that makes sense, and the Supply and Demand of renters.
Aspect One to Look For: Rental Prices
The most important thing to look for in buying a rental property is the average rents and their future trajectory. They will dictate how much you can spend on a property in a certain area. Because if the rent in the area isn’t high enough to beat out the mortgage payments, you will not have a cash positive property. Which is why most of the time, you won’t purchase a rental property over $200,000 because the rents most likely won’t be strong enough to beat the mortgage payment.
Aspect Two to Look For: Purchase Price
The second most important aspect in purchasing a Buy N’ Hold property is the purchase price. There are two things to keep in mind when purchasing.
One is to ensure the purchase price keeps the mortgage payment low enough so you can cashflow positive the moment you own it. This allows the renters to pay your mortgage while giving you a little extra on top for maintenance, a higher payment to pay the loan off sooner, or as extra capital to purchase another property.
Two is the average appreciation of properties in the area. This entails finding properties in areas that are strongly appreciating. This is usually not in the nicest areas, but that is because these properties have so much more room to improve than those in nicer areas. That is why it’s important to buy in areas that are being developed.
Aspect Three to Look For: Supply and Demand of Renters
The last aspect to look for is the Supply and Demand of renters in the area. This is important because it doesn’t matter how high the rent is if there isn’t any available renters. That is why you have to look at how quickly properties in the area are renting. If they are renting within a week, it’s a great place to have a rental. Usually this is in an area with a strong economy and job maker such as a University, Corporate Campus, or Developing High-Demand Residential Areas.
Keeping these aspects in mind when purchasing a Buy N’ Hold property will allow you create passive income with the lowest risk. Allowing you to have extra income to protect yourself from a loss such as car wreck, injury, job, and more. If you gain enough passive income you can retire early and follow your passion. However there is a better way than trying to do it yourself, you can actually work with the Matrix who can help you facilitate the entire process from purchase, rental, and property management.
If you’re interested in creating Buy N’ Holds for passive income, then you have to sign-up for our information meeting for the Buy N’ Hold Program.
It’s on the first and third Tuesday of every month at:
Matrix Real Estate Investor Network
2406 S 24th St, Phoenix, AZ 85034