Hard Money Facts

For many real estate investors, rental properties deliver a dream come true: passive income. Done right, your rental property will produce mailbox money. Your tenants pay rent, you provide maintenance here and there and your property appreciates while you enjoy the financial security of a cash-flowing asset. Even more, you can have pride in knowing you put your money to work for you.

But, to do it right, you’re going to need to do your homework and watch out for common flipping mistakes so you don’t fall victim to a bad rental property investment. Here are the 4 most important things to consider when investing in rental properties:

1. Invest in Neighborhoods You Understand

Warren Buffet famously proclaimed, “I only invest in things I understand.” The same rule applies to the single-family rehab and rental business: invest in places you know and understand. You’ll be familiar with details others might overlook, such as the rumored expansion of a large corporation nearby, or the addition of an upscale grocery store around the corner. How walkable is the area? What is the school district like? Is there a college nearby?

For help on your journey from rehab to rental, download this free investment rental property neighborhood checklist

Conventional wisdom says that late spring and early summer is the best time to sell a home or an investment property, but real estate investors and hard money lenders alike know that winter poses its own special opportunities, and that the colder months can be an ideal time to make your move.

Aside from the fact that hard money loans or property investment loans are also available in winter, there are other reasons why the winter months could be prime time to finance a house flip.

1. Less Competition From Home Buyers

For most people, winter is a time for family and holidays. Their cash is likely to go to presents and travel. Any major moves, such as the purchase of a new home, are often put on hold.

Because of this, you can approach sellers in the winter months knowing that the market is slower than usual. In the US, the annualized price of the average home can fluctuate 5-7%, depending on the time of year. In active markets like Dallas, the fluctuations have been recorded as high as 12%. And, almost without exception, the point at which prices hit their lowest level occurs during winter months.

2. The Timing From “Fix to Flip” Is Perfect.

Statistically, the best time to sell a house is in May. Houses sold during the first half of May typically sell 18.5 days faster than other months and go for 5.9% more money. On a $200,000 house, that could be a cool $11,200 bump in profits.

If you purchase a property in December, you can shoot for a completion date of May to bring your renovated property to market. It’s as simple as that: Buy during the slow season, and sell during the peak season. That’s a simple yet very effective way to maximize your profits.