Blog Post

Rental Investment Strategy

Joseph Blossman • Apr 24, 2019
Strategy – Rent and Flip
There are all kinds of strategies you can explore when it comes to real estate, but we are going to focus on just one: Rent and Flip. Rent and Flip is a strategy that involves dodging major repair bills and aim to hold mid-term rentals. This strategy is ideal for investors who do not want to hold on to their properties for the long term. While following this strategy, an investor should plan to hold their properties between three to ten years and is disciplined enough to facilitate careful and thorough research on all properties before purchase. It is crucial to the development of this strategy to flesh out a fully encompassing investment plan before purchasing any properties. At Omni Property Management, we look at 5 major points when developing this strategy for potential investors:

  • Total Cumulative Costs
  • Annual Costs
  • Annual Rental Income
  • Foreseeable Future Repairs
  • Forecasted Future Sale Price

The primary goal of this strategy is to map out when major repairs and maintenance will be needed on any given property. Most major repairs have an estimated life span, which allows any potential investor to have a general idea as to how long things in a property will last. For example, HVAC systems, water heaters, and roofing have general lifespans that are relatively similar across the board, so estimating your potential investment property’s major repair cycle is not necessarily something that should be considered impossible. Moreover, this strategy allows you, as an investor, a more accurate representation on your expected Return on Investment (ROI) and can give a more detailed roadmap as to what to expect over the lifetime of your investment property.


Total Costs
Total costs include every dollar spent on getting the investment property tenant ready. This includes, but is not always limited to, total sale cost, closing costs, repair costs, and any other one-time costs that must occur before your tenant can be placed. At Omni Property Management, our practice is to add an additional 10% to this estimated cost to allow you as an investor to plan for any unforeseen costs that could occur during construction.


Annual Costs
Annual costs are any costs that are recurring year to year. These costs include, but are not limited to, management fees, insurance, mortgage and loan payments, HOA fees, taxes, and any other reoccurring costs. It is vital to collect all of this information before you close on a property because these costs can easily push you over your budget. Remember that all of this information is available online and will take your time to research. We also recommend that you double check all of the information that the seller provides for you before closing on a property.

 
Annual Rental Income
When planning this strategy, you don’t want to assume your property will be rented 12 months out of the year as this is not the case for most rental homes. Therefore, we assume 10 months’ rent when calculating annual rent. This gives you about 60 days to have a tenant placed and will provide an accurate projection of rental income. We assume 60 days time for turnover to provide a better understanding of the potential investment. If the investment cannot earn the desired ROI with a 60 day vacancy time it would be better to rethink the investment.

 
Foreseeable Repairs
We at Omni Property Management look at three larger repairs when evaluating these repairs: roof, water heater, and HVAC. These appliances have a foreseeable life span, if properly maintained, and considering these major repairs on the forefront of your investment is critical. We recommend that every potential investor research the life spans of these major appliances and best practices for maintaining each appliance. Although there is no way to know exactly when any of these could stop working, statistically a roof lasts 20 years, an HVAC lasts 15 years, and a water heater lasts 8 years if properly maintained.

 
Future Sale Price
The final consideration an investor should take is the forecasted future sale price. Every property is an asset, and it is important to have an accurate projection of how much that asset will be worth in the upcoming years. Typically, the market value of any given property will be relatively slow and consistent, therefore you can use your property’s past market values as a guideline. However, if you notice seemingly random positive or negative spikes in past values, we recommend that you research any major changes or activity in the area surrounding the property. For more information about calculating the future sale price on an investment property, read this Motley Fool article.

 
There are 4 questions you need to ask when developing a strategy:
  1. How much will this cost me?
  2. How much annual income will this produce after annual expensive?
  3. When is the next time this property will need renovations and how much will they be?
  4. Lastly, how long do I want to own this property?
 

Looking to invest in Memphis Real Estate? Choose an agent that specializes in rental investments. Choose Omni Property Management for your property investment and management solutions, call us at (901) 372-5513 to start developing a portfolio!

Contact Us

Memphis
Mississippi

Share this post

By Omni Property Management 22 Mar, 2020
Due to the recent number of confirmed COVID - 19 cases in Shelby County Omni Property Management and Omni Realtors will be making the following changes to protect the health of our tenants, vendors, and staff. Office Hours: Although we will continue to be open, our main office will be closed to the public. You can still reach us at (901) 372-5513 or through your tenant/owner portals online. Showings: Limited to 4 people per showing. Real Estate: If you are working with one of our agents, they will be contacting you to discuss your personalized plans. Rental Payments: Rent can still be dropped off to our office via mail slot and mailed to our office. A confirmation receipt will be emailed to you. For more information about paying rent please click here. Maintenance: Our maintenance office will remain open. To submit a work order, you can use your tenant portal or call our office at (901) 372-5513. Lease Signing : We will sign all Tennessee leases via Skype and E-signatures. One of our agents will be there to review the lease with you and to answer any questions you may have during the signing. Move-In: The keys to the property will be placed in a secured box on the property on the day of your move in. Helpful Links: Tenant Portal Login Owner Portal Login Available Properties Call Us For help signing into your tenant portal call us at (901) 372-5513 or click here.
Realtors
By Joseph Blossman 04 Dec, 2018
Buying or selling a home can be very stressful, especially if you’re trying to navigate the waters on your own. If you’ve hosted a showing of your home or have gone to any open houses, you’ve likely been bombarded by agents. As annoying as they may sound, most of these agents are actually trying to help you with the buying or selling process. However, the tricky part is finding an agent who you trust and has your best interests at heart. What is a Buyer’s Agent? A Buyer’s Agent is exactly what it sounds like — someone who is there to assist you in finding and purchasing a home. They will be there to help you every step of the way, and they can actually save you a ton of money and time. How can they help me buy a home? Your agent will start by narrowing down properties based on what you are looking for in a home and assist you to determine your budget. Next, your agent will narrow down a list of potential homes for you. At Omni Property Management, our Buyer’s Agents have access to a database with every property listed for-sale in the licensed areas in both Tennessee and Mississippi. Therefore, they can find the perfect property that meets all of your criteria. They will then go on private tours of these homes with you and point out any repairs, renovations, or potential hazards within the home.. Once you’ve narrowed down your agent’s list, your agent will then help you choose the home that best suits you and your needs. Once you’ve selected your perfect home, your Buyer’s Agent will then help you with negotiating your offer. There are likely multiple offers on the property you’re interested in. Having an agent on your side will help you in choosing an offer that is reasonable and attractive to the seller of that home. Your agent’s experience with realtors and negotiation can save you a ton of money in this process, and they can help you avoid buying a home that has underlying issues. You also have the advantage of your agent’s network. Omni’s agents have spent decades in the real estate world, and have encountered a plethora of mortgage brokers, home inspectors, movers, real estate attorneys, and more. Having access to this diverse network will save you money on each step of the home buying process and will make each step much quicker and smoother. One of the biggest reasons to use a Buying Agent is avoiding mistakes in all of the paperwork that comes with buying a home. The paperwork can begin as early as determining a budget. Your agent will help you choose the right bank to take your mortgage out from, and they will help you understand every detail of your mortgage agreement. You will also have to put in a formal contract when you place an offer on a home, and your agent will draft the document and submit it to the seller. Once your bid is accepted, the agent will help you file for the home inspection which will ensure that you’re not buying a home with any major issues. If the inspection comes back clean, your agent will then draft a contract to transfer ownership of the property to you and file all paperwork with the county, state, and city for tax purposes. Your agent will also keep copies of each document on file. Having a Buyer’s Agent assist you with all of this paperwork ensures that each step is completed and done correctly and legally. What is a Seller’s Agent? Similar to a Buyer’s Agent, a Seller’s Agent is exactly as the name puts it — someone who helps you sell your house. They will make sure your home is listed correctly and marketed to as many buyers as possible. How can they help me sell my house? Your real estate agent will first tour your home and take pictures of the home in order to put it into the property database. Following their tour, Omni Property Management will provide you with a list of optional renovations that will increase the value of the home along with an estimated cost for each renovation, the current value of your house, and how much you stand to profit off of each repair. Omni will offer to finance the repairs for you if you cannot afford to do so at that time, and you will not owe anything until after your home is sold. For more information about this, please contact Omni Property Management at (901) 372-5513. Following the repairs, your Seller’s Agent will stage your home with appropriate furniture and take updated photos. These photos will then be uploaded to the online listing service that local real estate agents use as well as public listing services such as Zillow, Trulia, and other online listing services. Omni Property Management uses a software to automatically update your home’s listing on every possible online real estate platform to ensure that your home is reaching the maximum audience. Once your home’s listing is updated, your Seller’s Agent will handle each inquiry about your home. They will host open houses, handle every private home tour, and answer every question from potential buyers. They will also handle all negotiation for the home’s price and ensure that you will get the maximum sale price for your house. Once you have accepted a formal bid, the Seller’s Agent will draft a contract that outlines the transfer of ownership of the home to the buyer. They then coordinate with the buyer to get all of the appropriate documents signed and make sure that you get your money from the buyer. Ultimately, a Seller’s Agent ensures that your home is sold following all city, county, and state regulations and all tax codes.
How Credit Scores Work
By Joseph Blossman 13 Nov, 2018
Learning how the credit system is calculated is a vital tool that can be used to help better your financial situation, and is the first step in bettering your credit. Learn what steps you could be taking to raise your credit scores and increase your buying power.
Show More
Share by: