K.M. Minemier & Associates is a certified Woman Owned Small Business (WOSB) engaged in full service real estate asset management and marketing.

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Investor Series – Evaluating a single family home for investment

April 15, 2022

This is one of many articles we will be writing regarding investing in Real Estate.  Today we’ll be discussing how to approach a single family home for real estate investment and evaluate it for potential return.

There are a variety of properties you can invest money into but one of the more popular options is single family homes.   These are the most liquid (easy to sell) type of property and usually the most stable as the renter will typically treat the property like their own home.  Its not uncommon to see a tenant stay in a single family home for many years which has many benefits to the investor.

There are 2 primary ways in which you can make money on a single family home.   Those are CASH FLOW and APPRECIATION.   For CASH FLOW, we need to make a budget.  Our inflow will be tenant paid rent and our outflow will be a variety of known expenses and estimates.   For APPRECIATION, we simply need to take a look at the current market and appreciation rate and then make some projections.

As mentioned, when putting together a budget for expenses on a home you are renting out you will have some known expenses and some estimated expenses.   Known expenses are items such as property taxes, insurance and property management fees.   Estimated expenses could be items such as utilities, maintenance and vacancy rate.

To determine appreciation return on a property you simply need to look at the current market over the last year to see what the area appreciation of homes are and then make some projections based on the number of years you intend to hold onto a property and the appreciation trends you expect over that time frame.  A typical appreciation rate is 3-5% in a normal market but due to inventory shortages lately its not uncommon to see rates as high as 15-25%!  This can be a very significant return on your investment!

Tags: #investing

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