About 90% of the world’s millionaires got to the top by investing in real estate. It’s essentially the pinnacle of wealth.
The only problem is it’s not always the cheapest buy-in option on the market…
You simply need money to make money when it comes to buying, selling and renting out homes.
But lucky for you, having a stake in the game is now cheaper than ever before!
If you’re a potential investor who’s ready to use the housing market to generate passive cashflow, then here are some basic pointers to help you get started out on the right foot.
You may be wondering why real estate prices are in such a good spot right now…
The short answer is because the federal reserve is putting pressure on a rising interest rate policy, which inherently drives mortgage rates down.
In other words, it’s a great time to be buying and selling homes!
Just to give you an idea of what you’re up against, property offers have dropped from 53% to as low as 13% in the span of just one year.
This means that buyers have more negotiating power at their disposal.
But that’s not already enough to convince you, home values are expected to plummet throughout 2019.
So, what should your next move be if you’re looking to get in on all the action?
First, find a realtor that you can trust and who understands the market’s current condition.
Once a few selections turn up, weigh out a profitable price range. You can easily do this by basing what you pay on the Gross Rent Multiplier formula or GRM for short.
Don’t’ let the math behind this equation scare you away. All you have to do is divide the property price by the gross annual rent. That’s it!
For example, a home selling for $160,000 with $20,000 worth of annual rent would give you a GRM value of 8.
As a rule of thumb, you should never exceed this number.
Remember, the goal here is to produce a solid source of passive income that leaves you coming out on top.
If your GRM produces anything over 8, you’re simply in over your head moneywise.
There are other factors to take into consideration before you follow through with a purchase as well.
Not only are residential property prices significantly lower than usual, but owning rental real estate also comes along with mortgage interest deductions, the ability to write off depreciation expenses and travel discounts for visiting current or potential properties or even attending relatable seminars.
These are all added bonuses for buying into the real estate market. Just know that low interest rates and dwindling home values create a perfect buy-in opportunity.
That said, once you start working with a realtor and come across a home that you’re about ready to settle for, use the GRM formula to make sure you’re getting the most bang for your buck in terms of cashflow.