Target the Right Homes for Investment

and quickly identify the wrong ones...

Homes to Avoid Investing in

When focusing on a Buy to Let strategy there are certain types of homes that you will want to avoid adding to your portfolio.  The type of home you buy will influence your returns several ways, the first of which I would like to discuss is the types of tenants certain homes attract.  Investing in 1 bedroom or 2 bedroom homes will actually push the best tenants away from you.  In my opinion the best tenants are families with children that are attending school.  I believe that they represent a pool of potential tenants who are much more likely to stay for multiple lease terms.  1 and 2 Bedroom homes will not give them the room they need to call your property home for an extended amount of time.  These homes inevitably attract a more transient tenant base.  This equates to higher vacancy rates as it will always take some amount of time to secure a new tenant.  It will also mean higher maintenance costs because you will have to do some level of reconditioning to the unit between even the best tenants.

As you are shopping for potential homes to add to your portfolio another key characteristic you will want to focus on is the age of the home.  Anything built before the early 1940’s will undoubtedly have been constructed using plaster.  This can be a huge cost to nearly any rehab project.  Patching plaster is much more expensive both in terms of actual cost per square foot as well as labor hours spent on any project by your contractor.  If it is necessary to remove walls to change to floor plan or get into the wall to replace wiring or plumbing you can literally save yourself thousands of rehab dollars by choosing a home constructed with drywall as opposed to the exact same home constructed using plaster.

Another point of interest in homes built after the early 1940’s is that they are more likely to have been built on a slab or crawl space.  Eliminating the basement will save time and money as well.  Just think of the cost difference in replacing a furnace that is in an inaccessible basement versus a readily accessible closet.  Just in terms of labor hours you will save a bundle.  This does not even take into account that many older duct systems were lined with asbestos insulation and this could be another potential rehab cost that could be easily overlooked, not to mention the possible liability it could cause.

Pitfalls of Real Estate Investing

Identify the right house, AND the wrong one's