Ugliness. Look for properties that desperately need a face-lift. Find the ugliest, most downtrodden front lawn in the best neighborhood your Real Estate IRA can afford. The cosmetic fixes usually provide the best return on investment. Multiple studies confirm this. Look for properties with low curb appeal that need some TLC when it comes to lawn and yard care, a coat of paint, some pressure washing and some fence mending.
- A motivated seller. We’ve been in real estate a long time, and the best piece of advice we’ve ever heard to this day is “make money when you buy, not when you sell.” This means you need to get a good price on the property to begin with. Find sellers who need to sell quickly, whatever the reason. And then solve that problem for them. This is what will allow you to pay a wholesale price for a property, and will drive your profitability in the long run.
- Good neighborhoods. Not that there aren’t great opportunities in more challenged neighborhoods. But if you are in a good neighborhood you’ll attract better tenants – and reduce your headaches and possible liability. If you do buy a property in a tough neighborhood, make sure you get an extra good price. The exception: Gentrifying neighborhoods for longer-term investors.
- Gentrification. While we recognize that there are societal challenges with the gentrification phenomenon and the dislocation of families who can no longer afford to live in their old neighborhoods, gentrification still benefits the Real Estate IRA investor tremendously. You want to be in front of this trend when you can.
- Livability as is. You don’t want to be making great big expensive extensive remodelings. Generally speaking, few major remodeling projects add enough value to an investment property to justify their costs. Keep things simple when it comes to renovations and improvements.
- Good neighbors. The people who live in the neighborhood are your eyes and ears when you aren’t around. If there is trouble with the property, good neighbors will alert you before the trouble turns into an investment disaster.
- Good tenants. Always have your property manager screen your tenants very carefully. But you can reserve the right of final approval. Always check references, credit, payment history and criminal history. Make sure you understand the applicable fair housing laws, both at the federal, state and local level – and stick to your criteria.
- A good rental yield. Remember that whatever investment property you own, in or out of a Real Estate IRA, must present a better opportunity than simply owning a high quality bond or income fund. Know your ‘hurdle rate’ for capital – the minimum rate of return an investment must earn for you in order to merit consideration over simply placing the money in a money market or other alternative investment – and stick to it.
Want to learn more about a Real Estate IRA? If you’re a real estate investor, or interested in becoming one, and you are interested in leveraging the powerful tax advantages of the IRA, Roth IRA or even your 401(k) or SEP IRA to make the most of your real estate and other investments, we want to work with you. With offices in Charlotte and Asheville, North Carolina, American IRA is a leading provider of administrative services for owners of a Real Estate IRA and other retirement accounts nationwide. Visit us at www.americanira.com. Alternatively, call us at 866-7500-IRA (472)
We look forward to working with you.