In my post, “How to Prepare to Buy Your First Rental Investment Property”, I mentioned that FOCUS is key when it comes to investing in real estate.
There are so many property options and paths you can choose from. This is the reason why many people, like myself, get stuck in analysis paralysis and delay getting started in real estate investing.
It is important to educate yourself and learn what your options are, but pick one that most calls to you and focus on that. Don’t get sidetracked looking into every possibility. Because all you need is to get that first investment property. Once you take that first big step, you either hate it or love it.
If you hate it, then you did it and can move on with life. If you love it, you’d be looking for the next deal right after. I hate to be cliché, but “just do it” fits right in.
Now back to our buying criteria. Every investor will have a different strategy based on their needs and wants. Your investment strategy can be whatever you want it to be.
The short version of our strategy is:
We invest small multi-family or single-family rental property in the Conyers/Macon area built after the year 1950 with a purchase price under $150,000 and that is rented or can be rented for at least 1% of the purchase price. Ideally, multi-units would be 2BD+ and single-family homes 3BD+.
While that’s our focus, it doesn’t mean we completely ignore other opportunities. It just means that we prioritize the properties that fit into our strategy.
There are additional financial metrics built into our strategy and I have an upcoming post dedicated to rental property analysis, so we will deep dive later.
You don’t need all the fancy metrics and goals to invest in real estate. My dad is a simple man and he can’t be bothered with complex calculations. He doesn’t know terms like “Cash-on-Cash return or 1% Rule” and he doesn’t want to or need to know these. Whenever he sees a deal he likes, I run the numbers for him, and a lot of times, we arrive at the same conclusion.
All he does is scroll through Zillow or Trulia for properties that meet his criteria. My dad’s rental criteria is focused on fixer-upper rental properties that he can fix himself. Because my dad is handy, he can save a lot of money on rehab costs which in turn increases his return. My experience with the Big Horn rehab taught me that DIY rehabs are not for me. I still like fixer-uppers, but I prefer to hire out the work so I need to add the cost of hiring someone to the cost of the property.
Setting up your search
Here is what my Zillow search looks like. I know realtors hate Zillow, but I love it! No one can convince me otherwise.
As I mentioned above, our target markets are Conyers (the city we live) and Macon GA, and the surrounding 3 cities. You will notice that I have multiple saved searches for the same city. The difference is in the filtered options. Some searches are more narrowed down than others. For example, I have a search for multi-family. Another search for single-family and a search without a price range.
I also have “For Rent” searches so that I can see what the appetite for rentals is in the area. This also helps me figure out the estimated rental price and the price paid for those rental properties. When you do this, you may find that investment properties in the market you are looking at were mostly fixer-uppers or that the market is not rentable. Some neighborhoods are just not renter-friendly. This is why research is key.
How we arrived at our strategy
Our buying criteria have changed quite a lot since we started investing. As we become more experienced and move along in our journey, our goals evolve. The focus of our strategy may also change with the financial means available. If we have limited credit capacity or limited cash, we may opt-out for smaller deals and lower prices.
Initially, we wanted to keep our investments local so that we could manage them closely, but as the housing around us became unavailable we had to shift and adjust.
Before I decide to invest in a particular city or market, I do my homework to make sure that the available inventory aligns with our investment strategy.
I decided on Macon because after doing some research, it came up as one of the fastest-growing cities in Georgia.
This city has a reputation for lack of quality tenants, high crime, and houses with severe deferred maintenance. There are a lot of abandoned property and many areas of the city are not being maintained. However, there is a lot of construction and investor activity that caught my attention.
In my days as a property manager, I always worked with investors that focused on buying fixer-uppers in developing areas. This has been the foundation for my strategy as well. When we bought the Florida Duplexes, they were not in a very good area, but it was a prime location because the city itself was going through major growth. Due to COVID, growth somehow accelerated and we sold these at a premium.
We are in the real estate game for the long run, so we are not in any rush. We buy strategically and we wait.
When we started investing in 2019, we only wanted to buy multi-units (duplexes and quadplexes). However, when we got our first single-family in Miami, Florida, we decided to include single-family homes (SFH) into our investment strategy. Here is why we like SFH: a lot of maintenance items can be transferred over to the tenants. For example, landscaping service, all utilities, minor repairs, up-keeping of common areas.
In our experience, renters of apartments are needier than those renting a single-family home. When we moved to Georgia we targeted mostly single-family while also keeping an eye out for small multi-units that have separate meters (tenants pay for all utilities) and are low maintenance.
What I do like about multi-family is that you can grow your portfolio faster. This is why you see I have two searches. One for multi-family and another one for single-family.
As of right now, we have one fourplex and 7 single-family homes for a total of 11 units. We are not actively searching for properties, but still keeping an eye out for the one. You never know! A lot of these properties I bought when I was “not on the hunt”. The thing about having a set strategy is that when a property that perfectly aligns with your strategy becomes available, it becomes a must-have so you use up all your creativity to make it happen.
For now, we are sticking with long-term rentals, but eventually will want to do a flip to see if it’s something we would want to do more of. At a later point, we also want to buy a condo in Cartagena, Colombia that would be an AirBnb investment and vacation home. When we retire, we are considering of living outside the US a few months a year to keep costs low and thought Cartagena would be the perfect spot.
I hope you found this post helpful. A few takeaways.
- Focus is key
- Having a strategy is a must
- Your strategy doesn’t need to be complicated
- You don’t need a masters in financial analysis to invest in real estate
- Studying the market you want to invest is important
- Align your market with your investment strategy for exponential returns
- Be on the hunt even when you are not
It’s your turn, what do you want your strategy to be? Have no idea? Go to Zillow and pick any city, then just start looking at the listings.
Do a google search: “Best cities to invest near me” then go to Zillow and search for properties for sale based on your google search.
Look for houses that have been in the market for a long time. A lot of times the houses no one wants are the best investments.
Zillow gives you an estimate of your mortgage payment and rents price estimate. You could also do a Zillow search for “For Rent” instead of for sale so that you can see what type of houses are renting, the price they sold for, how much they rent for, and also the type of renovations applicable to the market.
Then when you are ready, come back and fill the blanks in the statement below.
I want to invest in (type of property. ex: single-family, Airbnb rental, etc) located in (city) that is within (price range) and rent for (if applicable, amount needed to cover mortgage and expenses) located in or near (park, schools, growing city, downtown). Preferable is (renovated/fixer-upper/low maintenance). My renters are (high-income earners, families, low-income, middle class, single, student)
You can add the number of bedrooms. If your target renters are families, you may want 2+Bedrooms and 2+Bath or if your renters are students, a 1 bedroom located near the school would be best.
Having a specific strategy in mind also helps you become more motivated because you remove layers of uncertainty and have something to look for. I have a friend who is working towards a goal of buying an investment cabin in the woods that she can Airbnb. It started as an idea that she has narrowed down to a specific goal.
Thank you for reading! Keep an eye out for the next post of this series! Next up is on the series is: analyzing rental properties. If you haven’t already, be sure to subscribe to blog post notifications so you don’t miss out.
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Also, let me know if there is anything else you would want me to discuss in a later post.
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