Of course, the main criteria would be a high capitalization rate (cap rate).
A very simplistic example of this would be a property that sold for 0,000 and produced a ,000 monthly rental income.
That would equate to an annual ,000 rental income or a 12% cap rate (12,000 ÷ 100,000).
In reality, a cap rate of around 6-8% would be more attainable. Rental properties are most common buy and hold investments in the real estate industry.
The savvy investor will gather all the information required and consider all the facts along with his or her objectives before moving forward.
“Buy and holds” are for investors who wish to diversify their portfolios with more long-term investments and would like take advantage of the tax deductions in the process.
They seek properties that are not only a great buy, but markets that can produce good rental rates and fast occupancy.
Local markets should also have a history of stable tenants with low turnover rates. In fact, it can actually be quite the opposite when looking for long-term buy and hold rental investments with the higher cap rates.
We are all quite familiar with the old adage “location, location, location” when buying real estate, especially for a business or personal residence. Consider the fact that some of the best deals can be found in the less desirable areas.If you can couple this with a market that produces a history of good rental rates and low turnovers, then you could reasonably expect a higher cap rate.Just be sure to weigh all of the balances and carefully consider all of the expenses that you’ll need to subtract in order to come up with your true net.Be sure to include fix up and repair costs, ongoing maintenance fees, property management fees (if not handling this on your own), occupancy rates and so on. As with any long term investment, be prepared to weather the storms since markets can change and rents can fluctuate.Tip: Be fair with your rates, especially with good tenants – they are like gold...Depending on your budget and investment goals, you may be considering a “high yield, slow sell asset” such as a large apartment building.