Category Archives: Investment Strategies

Home Improvements, Investment Strategies

Ways to Increase Value

What are the Top ways owners can increase their property value or generate revenue from their properties? In this two part blog I will give a 7 ways on how owners can increase their property value or generate revenue from their properties:

  1. Make improvements: Making improvements to the property can increase its value and make it more attractive to potential buyers or renters. Examples of improvements could include upgrading the kitchen or bathrooms, adding square footage, or improving curb appeal.

Let’s say a homeowner has a property that was built in the 1980s and hasn’t been updated since. The kitchen has outdated appliances, the bathrooms have old fixtures, and the carpet is worn and stained. The homeowner decides to invest in making improvements to the property by renovating the kitchen, upgrading the bathrooms, and installing new flooring throughout the property. After the renovations are completed, the homeowner hires a professional appraiser to evaluate the property’s value. The appraiser takes into account the improvements that were made and compares the property to similar properties in the area. Based on this analysis, the appraiser determines that the property is now worth $50,000 more than it was before the renovations were made.

In this example, the homeowner was able to increase the value of their property by investing in renovations and upgrades. The improvements not only made the property more attractive to potential buyers, but they also increased the property’s value in the eyes of the appraiser.

  1. Rent out a portion of the property: If the property has additional space, such as a basement, garage, or extra bedroom, it can be rented out to generate additional income.

Let’s say a homeowner has a property with a detached garage that is not being used. The homeowner decides to rent out the garage as a storage unit to generate additional income. The homeowner cleans out the garage, installs shelves and locks on the doors, and advertises the space for rent on local classifieds websites and social media.

After a few weeks, the homeowner finds a tenant who is willing to pay $150 per month to use the garage for storage. The homeowner and tenant sign a lease agreement that outlines the terms of the rental, such as the payment due date and the length of the lease.

In this example, the homeowner was able to generate additional income by renting out a portion of their property that was not being used. By turning the unused garage into a rental unit, the homeowner was able to generate steady monthly income without having to make any significant investments or changes to the property.

Keep track of your project costs with these free project cost templates.

  1. Convert the property into a rental property: If the property is not currently being used as a rental property, the owner can consider converting it into one. This can generate steady monthly rental income and potentially increase the property’s value over

time.   Let’s say a homeowner has a property that they inherited from a family member but they already have a primary residence. The homeowner decides to convert the inherited property into a rental property to generate monthly rental income. The homeowner hires a property management company to handle tenant screenings, lease agreements, and maintenance issues.

After making some minor improvements to the property, such as repainting the walls and upgrading the appliances, the property is listed for rent. After a few weeks, a tenant is found and they sign a lease agreement for a monthly rent of $1,500.

In this example, the homeowner was able to generate steady monthly rental income by converting the inherited property into a rental property. This can be a good option for homeowners who have a property that is not being used or who are looking to generate additional income without having to sell the property.  To keep track of your  rental income, Zillow offers Rental Income and Expense Forms and Tools  to down load and use for free. You can get them here.

End of Part 1.

Investment Strategies, Real Estate Market Analysis

How to Analyze any Market Quickly

Investment in Real estate offers many challenges but data science in the path of the uncompromising analytics and using analytics to minimize risk investing and invest in a market that is growing will give you the greatest advantage for a maximum return on investment

Here is how to pick to pick the best cities and neighborhoods to live in and invest in even if you don’t know anything about that market. The most successful investors always do their research before investing   when researching any neighborhood in the country, the best statistic data for any city is www.city-data.com . Here are some key things to look at.

Population Growth.  If a City is between one quarter and one million in population it should show a 20%% growth during 2000 and 2019.

In Columbus, OH the Population in 2019: 898,553 (100% urban, 0% rural). Population change since 2000: +26.3%
Read more www.city-data.com/city/Columbus-Ohio

In larger cities over one million like Los Angeles, an acceptable growth rate is about 15% per year. If the city is over two million then the acceptable growth rate is 10% per year. Larger cities means lower cap rates. Most investors don’t buy in a city with a declining population. Some smaller cities lose population to the bigger cities, so populations should be increasing and not decreasing. The smaller City of Dayton, Ohio lost -15% in population.

Median Household Income the rule of thumb for investors here is the Median Household income should increase 30% from that same nineteen year period 2000 to 2019.  Let’s look again at Columbus, OH. The estimated median household income in 2019: $57,118 (it was $37,897 in 2000) that is 33.65%.

Next Look at the Median Household Income or Condo Value

The rule of thumb for investors here is this value should be at least 40% or more. The estimated median house or condo value in 2019: $173,300 (it was $99,100 in 2000) Columbus: $173,300. The difference is 42.9%.

The site also has  inter active maps for any area  The Median Household Income Map  shows high and lower incomes breaks around the city. This is a good way to look at smaller neighborhoods  around the high median income areas. These are the places to look for good places to invest in real estate. The household income of the neighborhood should be from $40,000 to $100,000 income. The data indicates that delinquency rates increases with incomes less than $30,000.

Crime and change in Crime level – City Data

You want to make sure the city you are investing in has a crime number is lower than 500. That is the same for any size city above 100,000.

Crime data in Blue numbers under on the left are 666.7 on the Left but declining to 423.4 on the right side show the crime levels are declining. Also you can look at the rate of decline which is 63.5% over that same time period. The city of Grand Rapids, IL shows a decline in crime.

Crime level is tied to delinquency. The cost of delinquency for a landlord can include eviction fees and rehab costs that can absorb all the profit you make for the year or more.

When looking are some of the smaller neighborhoods  to move to or invest in,  here are some other things you want to consider;

Median Contract to be Rent $700 to $1000 per month. Never go below 6$50. In our example of Columbus, OH, the Median gross rent in 2019: $984.
Read more: http://www.city-data.com/city/Columbus-Ohio.html

Unemployment Rate

Each city has a map that shows the unemployment rate. For example,  cities like Columbus, Ohio, the unemployment rate is 3.3%. The area you invest in should never have an unemployment rate that is 2% higher than the nearest major cities’ unemployment rate with regard to risk. The nearest major city near Columbus is Cincinnati and their unemployment rate is 3.9% so Columbus has a very low acceptable unemployment rate.

Poverty Rates

The poverty level rule of thumb here is 20% or less. 15% or less is even better. Poverty level over 20% may indicate an unprofitable  neighborhood for investment. In our example City of Columbus, the percentage of residents living in poverty in 2019: 16.3%.

Job Growth

Finally you want to look at employment growth the last twelve months for your area which should show an increase and not a decrease. You can search by state at deptofnumbers.com/employment/states . Search job growth for all the major metro areas at deptofnumbers.com/employment/metros .

Cities that make the cut

Some of the best cities to invest in and live in are Provo Utah, Huntsville, Alabama which is also growing and Meridian, Idaho offers good potential for living and investment. Colorado Springs is also a good from job growth perspective and benefits from the bigger City of Denver. Tacoma benefits from Seattle. Orlando and Tampa also made the cut as did the city in the middle- Lakeland, Florida which benefits from both cities and was voted the number one place to live.  Best Places to Live in America

Remember all investing has some level of risk but knowing how to look for trends by using your cities local data, you can use some of the same rules of thumb that successful investors use to reduce your risk by analyzing your market before you buy.

Disclaimer. this is not financial or real estate investing advice. This article is for educational and informational purposes only.