What Qualifies As A Good Investment Property

What Qualifies As A Good Investment Property

Joe: Hey, it’s Joe Crump. Question today is, “What qualifies as a good investment property?” That’s a big question. And it depends on what you’re trying to accomplish. Of course, you’ve got the two major types of investment properties, flip properties and long term investments. And each of them will have to be analyzed separately.

Joe: If it’s a flip property you want to know how much cash you’re going to be pulling out of that property when you sell it. You have to know how long it’s going to take you to sell it, how much it’s going to cost you to get into it, whether you’re going to need to use a bank, whether you’re going to use the seller. I recommend that you try to do things without banks, without money, without credit. Go directly with seller financing. Structure your deals in a way using the zero down structure hierarchy that I teach, subject to, multi-mortgage, land contract/contract for deed, assignable cash deals and lease options. Use those zero down structures and you’ll be able to buy as many of these types of properties as you want and you typically will be able to get some pretty good deals doing it that way.

Joe: And, if you can buy them under market value in addition to buying them on terms, you’re going to be even better. Because remember, there’s only two ways that you make money as a rel estate investor. One is by buying a property at or below market value on terms, or, buying a property substantially under market value for cash. You can do both of those things without using any of your money. If you’re buying for cash you’re going to be assigning it to someone else.

Joe: But if you buy it with your own cash, you’ll make even more money. And that’s ultimately where you want to be. You want to be able to buy properties dramatically under market value that are also on terms. So, if you could buy something that’s dramatically under market value that might need some repairs but you get it on terms and then maybe you need to put ten grand worth of work into it, that’s a beautiful deal. Especially if you get it on a land contract or contract for deed with a zero interest rate loan on it so that every payment that you make goes directly to principal. Which means that, in most cases, instead of having a thirty-year amortized loan, you’re going to pay it off in seven to ten years, depending on the price of the property. And mostly we’re talking about properties under $150,000 when you’re looking at those types of deals.

Joe: You’re probably not going to keep long term properties that are over $200,000 or $250,000, or at least when you initially buy them, they’re going to be under that value. Because the income that they make has to cover the financing that’s on the property. So, you want to have enough to make that work.

Joe: So, there’s a lot of different types of properties that you can get and you want to make sure that you have the cash flow you need. You want to make sure you have the equity position that you need. You want to know what your exit strategy is going to be. Never take a property that you don’t have a solid exit strategy. And the more exit strategies you have, the bigger variation, the more – the safer – the deal is going to be. And that’s why we use the zero down structure hierarchy. Because as you go down the hierarchy your control over the property changes.

Joe: At the top of the hierarchy is subject to. That gives you the most control of the property. And as you go down the line, you have less and less control, whether it’s multi-mortgage, land contract/contract for deed, assignable cash deals – less control. So, you always buy a property with the structure using the most control and you sell a property with a structure getting the least control. So that if I sell a property on lease option, that buyer is using the structure to buy the property from me, having the structure that gives them the least control over the deal.

Joe: And it makes it easier for me to get rid of them if they default. I want to be able to get that property back without losing too much money if they default, and not have to go through a foreclosure. So, that’s the best way to sell a property. But I’ll never buy a property on a leas option. I’ll buy it on a land contract or subject to or multi-mortgage because I’ll have control. Subject to, I’ll have control over the deed. Land contract, at least I have a recorded agreement that they can’t get around until they get rid of me. And they’d have to get rid of me through some judicial process to get rid of me, whether it’s through foreclosure or through just taking me to court to get rid of me.

Joe: So, those are the basics. What I suggest is that you learn what makes a good deal. And learn what type of money that you need to purchase the property, what type of structure of deal you need to do, what type of cash flow you’re going to have on that property. What kind of exit strategy you’ve got on that property. And whetner you’re going to keep it for the long term or whether you’re going to flip it immediately. And if you understand the dollars and cents that’s going to come out of all those things before you buy it, you’re going to know that you’ve got a property that’s worth doing – or not.

Joe: All right. Subscribe to the channel. Go to JoeCrumpBlog.com to sign up for my free newsletter. ZeroDownInvesting.com is my six month mentor program. So, take a look at that as well.

Joe: All right – take care.