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Invest in Residential Property like a Professional

Experts share their tips for financial success.

So, you're thinking of investing in property? 
In today's often unpredictable real-estate market, single-family homes remain a safe option for investors because of persisting demand, an attraction for long-term residents, and retained or appreciated value over time. 
Ryan Mahan, the owner of Real Property Management Trailhead in Fort Worth, suggests investors consider price, location, rate-of-return, and management companies before selecting a property to skip the drama and maximize the acquisition.  
"Just because a property is a bargain doesn’t always mean it is a good deal," says Mahan. "Market value is just one of the features to consider when choosing an investment property."
Below, he shares the main components to consider when selecting an investment property. 
PRICE
"For your first step in identifying a stable investment property, find a single-family residence offered below market value," continues Mahan. "However, discovering why the home is bargain-priced is just as important as the price tag. Homes needing minor repairs or cosmetic updates might seem like a great deal and often are – just be sure that the house does not have extensive damage or require major repairs. 
"Buying a fixer-upper might seem like a good idea, but anything spent making the property habitable must be factored into your rental margin. Look for properties that are in good shape but are underpriced, perhaps because the sellers are in a hurry or have incorrectly estimated the value of their home."
LOCATION
"It may be a cliché, but the location may determine whether you profit from your investment," says Mahan. "Check out the neighborhood carefully. Consider the nearby rentals and compare rental agreements, including price and market saturation. 
"Areas with low crime rates, good schools, high employment, access to public transportation and shopping opportunities, or other appealing features are ideal. Areas with vacant rentals and low rent can indicate potential trouble. The ideal location will offer single-family homes with relatively low market values but comparatively high rents."
RATE OF RETURN
"Beyond the price of the home and the location, you must also crunch the numbers," explains Mahan. "A good investment offers a solid rate of return. In real estate, this rate, or capitalization rate, can vary by area but usually ranges between 4% and 10%. To find the capitalization rate for a potential investment property, calculate your net operating income (rents less expenses) and divide it by the home sale price. Be sure to include property taxes obtained from the county assessor, association fees, and any extra insurance required if the home is in an area prone to natural disasters.
"On average, it’s best to keep expenses around 50% of the gross rent, also called 'the 50% rule.' If the property you are considering doesn’t offer a good return, shop for another property. The residential market is rich with homes to choose from."
MANAGEMENT
"To ensure the continued profitability of your investment property, you need a trustworthy, professional property management company that understands your investment goals," concludes Mahan. "At Real Property Management, we have the expertise to reduce your costs and keep your profits high. Our tool, Wealth Optimizer, helps our customers understand the potential returns and expenses of a property they already own or are considering. With proper planning, they can anticipate costs associated with vacancies and capital improvements and keep track of their investment’s appreciation over time.
With our competitive pricing and guarantees, you can be confident that your real estate investment is in the right hands."

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