Welcome to Week 18 – this week, let’s discover why Chris says Owner Profitability is Job #1
Buying and renting for the long term is Chris’s kind of real estate investing. Flipping houses is actually a construction business. Buy low, improve, and then sell for a profit. It’s is more risky than buying and renting – but selling a property from time to time can make sense, if you can cash out one property and re-invest in a new property for a greater return. Chris’s investing strategy is all about the long view: buying for cash flow, not short term gains.
Chris shows investors how to value a property based on cash flow. He also discusses all of the obvious–and not so obvious–costs and expenses you may encounter in your investing activities. More importantly, he gives investors a profit formula and evaluation method that anticipates these costs.
Let’s talk about what Chris calls The ‘Wal-Mart’ Client
“The Wal-Mart Client,” refers to the Best Case Working Class Rental Applicant. Many towns steadily lose population as their manufacturing base shrinks. A ‘good’ job may not pay much money. The majority of working individuals in the Springfield market can afford around $450 a month in rent. If your cost structure allows you to charge rent at this price-point, your next tenant will come from a broader pool of applicants.
Roost’s preferred tenant earns $350 – $400 a week. Think Wal-Mart Supervisor earning $9.25 an hour, 35 hours a week. They work for a stable company – perhaps in health-care, a call center, or even fast food. They may still require some form of public assistance, but they have steady employment.
$9 x 35 hours a week grosses about 13-65 a month. We look for at least three times the rent in income. 13-65 can pays about 455 in rent. If you can rent a unit for400 vs. 500 dollars, you will have a better shot at collecting consistent rent — versus inconsistent, or no rent at all.
Chris’s goal is to buy property that we can cash flow at these income levels. By expanding the applicant pool, we have a better chance of finding the tenant most likely to pay the rent and maintain the property throughout the lease term.
And join me next week when I’ll explain why relationships are key to success in your market.
For a free copy of the full book, A Real Estate Investor’s Guide to Profitability, email FreeBook@ROOSTRealEstateCo.com and we will send you one. Or download a free e-book version here: MakeRealEstateWork.com/free-book