HOW TO RECOGNIZE THE RIGHT MARKET
Yes, it’s location, location, location plus the type of market needed to maximize your investment in residential real estate
Guidelines to the Selecting the Best Market
1. Cash Flow
Formula: If the monthly rent income is in the area of 1% of the purchase price of the property, in most cases, this will cover principal, interest, taxes, insurance and other expenses resulting in a positive cash flow month after month for the investor.
Example: $1,000 of monthly rent is 1% of purchase price of $100,000
2. Equity Buildup Over Time
Equity is accumulated by Appreciation Gains and Principal Reduction added to the down payment.
Formula: The market must have long term appreciation stability.
Example: If the annual appreciation rate for a market has been 4% to 8% for 15 to 20 years then it is likely that that rate will continue for the future producing a significant amount of equity in the property. What is to be avoided is a BUBBLE UP of 20% to 30% of annual appreciation and then a BUBBLE DOWN of 20%–30% of annual depreciation.
Locating the Right Neighborhood
Look at the schools, services and shopping available. Not all neighborhoods in a good market will maximize your investment.
Do your homework to locate your market. Selected locations in the I 35 Corridor from San Antonio to Austin are excellent for new duplex investments.