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INVESTORS

You’re flipping, you’re renting, you’re looking for the best deals in this crazy market and of course off market properties are the best! You’re looking for investor friendly realtors who are willing to put in the time and effort to help you make good financial decisions. Whether you use cap rates, the 1% rule, the 70% rule, or another formula, we can assist.  

Flipping vs Buying and Holding

Passive vs. Active Income 

Whether you are just starting or have been investing forever chances are you have made the decision on whether you want passive or active income.  

Passive income is money that works for you without you having to work too much. Whether you play in the stock market or own rental properties, you are directly getting paid without actively clocking in and out. 

Active income is an appropriate name because you are actively working for your money. It can be working an active 9-5 or in this case, flipping homes. Even if you're not doing the work yourself. Finding a property, running the numbers, planning and purchasing the materials, hiring the contractors, supervising, and reselling the property can be a lot of work but if done right, very rewarding. 

Asher House Realty along with AH Renovations, has a network of contractors that we work with to help you get the most money out of your property, quickly, whether you are flipping or needing make ready rentals.

Two Ways to Flip Properties 

The first is properties that can be obtained below market value because they are in financial distress for example, foreclosures and short sales. The second is a fixer-upper, or a property with structural, design, or condition flaws that can be repaired to create value. 

Many distressed properties can be found on the market. Investors who go after distressed properties identify homeowners who can no longer manage their properties or find homes that have acquired to much debt and are at risk of going into default.

Investors who prefer fixer-uppers will remodel or update a property so that it's more attractive to homeowners.

Cap Rates

Every investor has their own formula for deciding the value of an investment property. One of those formulas are Cap Rates. Cap rates are calculated by dividing your Net Operating Income (NOI), (rent minus expenses) by the market value of a property. 

1: Determine your asset value. 

2: Determine net annual operating income. This should include anything making profit on the property.

3: Subtract operating expenses. Deduct all costs—excluding the mortgage—such as property management, owner association dues, taxes, insurance, and so forth. 

4: Divide your net income by your asset value and that will give you the cap rate

General rule of thumb, lower cap rates equals less risk and higher cap rates equal higher risk

70% and 1 % Rule

ARV stands for After Repair Value. A lot of investors use the 70% rule when purchasing property. The 70% rule states that an investor won't pay more than 70% of the ARV minus repairs. If you have deducted a property will be worth 200K after remodel you should be all in with purchase and repairs at 140K. 

The one percent rule states the monthly rent should be equal to or greater than one percent of the total purchase price of an investment property. 

However, the one percent rule doesn’t account for other expenses, such as loan fees, closing costs, repairs, maintenance, insurance, and taxes.

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