One Square Mile, Then Zero in!

                Whenever people ask us about our triplex they always want to know how we found it. We actually just happen to come across this house while driving around one day. The house was in a row of three houses all for sale by the same real estate company. By this point we were working with a real estate agent so we gave him a call and had him look up one of the homes on the MLS that caught our eye.

                I wish I could say that this was all of the work that we did to find the house, because it really was just as simple as driving around and noticing a for sale sign stuck in the grass. But, you never know which method of finding is going to produce a diamond in the ruff, so it is important to use as many methods as possible. We used the following methods to find our house, and to speak truthfully my wife did pretty much all of the finding.

               

1.       We first narrowed our search to all of the real estate within one square mile, and tried to become the property experts in that area. This is an ongoing process because the market is always changing and new houses are being listed all the time.

2.       We drove around several neighborhoods looking for houses for sale

3.       My wife searched on Craigslist and other local online classifieds like ksl.com every day for about 6 months. Eventually we started seeing the same houses posted over and over again, but we looked through several hundreds of house listings.

4.       We visited properties with our realtor that he found for us and ones that we found online. But out of the hundreds my wife found online, we only visited about a dozen of them.

5.       One of my favorite things that we did was just walk around neighborhoods in the evenings. We noticed a lot more walking around like this than we did when driving. And it’s fun to just get out and take a stroll while admiring houses.

         I have no idea if these are the best ways to hunt for that perfect house, but these are the things that we did, and it seemed to work alright. If anyone knows of better ways (and I’m sure there are) to find real estate I would love to hear those ideas. We are always looking.

We Have to Pay For That!?

          During the process of buying this house we discovered many extra costs that we didn’t even think about. We obviously had to factor in the mortgage, taxes, and insurance, but many other charges make up the total monthly cost of owning a rental:

1.       Mortgage Insurance! So apparently if you make a down payment less than 20% of the loan then you have to pay this pesky mortgage insurance. I know...Lame! If you want to get into real estate and you don’t have this much to put down then expect to pay .05% - 1.0% of the entire loan amount on an annual basis. You must pay this premium every month until the Loan to Value ratio is below 20%. In many case this may take around 9 years to achieve if you just make normal monthly payments.

2.       Mortgage Insurance Premium!  Yep, that’s right, more insurance! If you take the less than 20% down payment road, then the day you close on the loan you have to pay a premium. This premium is usually around 1.5% of the loan value. Outrageous! But if the income from the rental outweighs the extra costs that mortgage insurance brings, then by all means...Buy!

3.       Repairs. The older and more rundown your house is the higher this expense will be each month. So buyers beware of money pits. We’ve lucked out on this one so far.

4.       Garbage, Sewer, Water, etc. These expenses depend on whether you make your tenants pay for them or not. As an extra benefit of living in our house, we don’t make the tenants pay for these items. They only have to cover electric and gas.

5.       HOA Fees. (If applicable) Usually if you own a condo or townhome you will have HOA fees that cover many things like exterior maintenance, grounds keeping, garbage, internet, etc. Every complex is different, so you will have to verify what is covered under HOA.

6.       Management Company Fees. In our case we manage our own property, but eventually we may pay a management company when we move out of state. This cost varies by area and to what extent you want the company to control your property.

          Other costs may exist depending on where you live, but these are the costs we have seen in the Provo area and with our own house. We searched for months before finding a property where the total costs were far enough below the potential rents.

          If you’ve seen additional costs with owning a rental I would love to hear about them. 

Researching Rents

Along with location, researching rents is also important when looking for the right house. Once we knew we wanted to find a house close to campus (within a five block radius), we started looking at rent prices. Because we both had lived in Provo for a few years already going to school, we had a pretty good understanding of what rents were for different apartments, but we still followed a couple tips for researching rents:

1.       When visiting homes for sale be sure to ask the current tenants what they pay for rent.

2.       Look for apartment listings in the local online classifieds. You will want to compare what similar apartments in the same area are charging for rent.

3.       And if you are really serious, you can try listing the house for rent long before you buy just to get a feel for the demand at certain rent price points.

Once you have a feel for the rents certain types of apartments can fetch, you will be armed with good information for determining if a house is a good buy. After our research in Provo, we found that about $600/month was a good asking price for a one bedroom apartment within five blocks of campus. Now, many factors go into that price, but if the apartment is nice, clean, has good amenities (like a washer/dryer included), and is close to campus $600/month is a competitive asking price. The more you know about rents in your particular area of interest the better prepared you’ll be as a landlord.

Location, Location, Location!

            Location is very important when it comes to investment properties. So my wife and I wanted to find a house as close to Brigham Young University as possible. The University is an anchor for stability when it comes to keeping any rental property full with tenants. As long as BYU is around, and I imagine it will be around for a long time, we will have renters willing to pay to live in our house. This same principal holds true for any location around the world. As long as your rental is near a main hub that consistently attracts people to stay for a prolonged period of time, then you will always find potential renters. That being said, universities make a great hub to attract prospective tenants if you are looking for a good location to buy a house. The demand is constant for housing in these areas.

             What other hubs have you seen that make great locations for rental properties?

We bought a rental!

Now what? ...Well...make it make money of course!


This site will be all about the ups and downs of owning a rental property, and the things we've learned along the way. It's an exciting ride! So strap in and enjoy it with us!

Our first rental property in Provo, Utah

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