Understanding the particular market factors that drive investments is critical. After all, it’s easy to invest. Making reliable, repeatable profits is the tough part. When it comes to income properties, realtors must be able to clearly explain to potential clients exactly what makes the process work because, for many people, income property investing is a vaguely understood concept at best.
Purchase Price – Perhaps the most prominent contributor to whether or not your income property makes money is how much you pay for it. Is the purchase price a random number snatched out of thin air? Maybe but more likely it is influenced by your local supply and demand for real estate.
Mortgage Terms – AIPIS trained realtors next learn how important the mortgage terms are to the long-term success of the deal; success defined by profit from cash flow, appreciation, etc. The interest rate tied to the mortgage is a biggie. Banks normally don’t just make up rates. The established percentage you pay is a direct result of monetary policy established by the Federal Reserve, plus the global demand for government bonds that mortgages are indexed against.
Rents – The amount of rent you can collect by tenants occupying your income property is another result of supply and demand. How many people are seeking to rent a property at the moment in time you are trying to fill a vacancy? Also a factor is the area’s employment base. Rental rate is strongly correlated with how many people have jobs and how much money they make. As the saying goes, you can’t get blood from a stone.
Realtors should have a firm grasp on the above topics and others when discussing the idea of income property investments with clients. AIPIS accreditation insures you’ll be ready to answer any questions that arise. Call 714-820-4200 to get your rental property education started today.
The AIPIS Team
Flickr / Roger Blackwell