Ultimate Harvey Real Estate Investing Guide for 2024

The term BRRRR is an illustration of a long-term investment plan — Buy, Rehab, Rent, Refinance, Repeat. BRRRR is a strategy for continuous expansion. A crucial component of this program is to be able to do a “cash-out” mortgage refinance.

When you have concluded renovating the property, the market value must be higher than your total acquisition and rehab costs. The property is refinanced based on the ARV and the balance, or equity, comes to you in cash. You acquire your next asset with the cash-out sum and begin all over again. You buy more and more houses or condos and continually expand your lease income.

When an investor has a substantial portfolio of investment homes, it makes sense to hire a property manager and designate a passive income stream. Find top Harvey property management companies by browsing our directory.

Factors to Consider

Population Growth

The increase or downturn of a market’s population is a valuable gauge of the region’s long-term appeal for rental property investors. If the population growth in an area is strong, then additional renters are assuredly relocating into the market. Employers think of such a region as an attractive region to move their company, and for workers to situate their households. This means stable tenants, more rental revenue, and more likely buyers when you intend to liquidate your property.

Property Taxes

Property taxes, maintenance, and insurance costs are examined by long-term rental investors for forecasting expenses to estimate if and how the investment strategy will pay off. Excessive expenses in these categories threaten your investment’s profitability. Steep property taxes may signal an unreliable community where expenditures can continue to grow and should be treated as a red flag.

Price to Rent Ratio

Price to rent ratio (p/r) is a market indicator that informs you how much you can anticipate to demand as rent. The amount of rent that you can demand in an area will impact the price you are able to pay determined by the number of years it will take to recoup those costs. You need to find a low p/r to be comfortable that you can establish your rental rates high enough for acceptable profits.

Median Gross Rents

Median gross rents signal whether a city’s lease market is dependable. You are trying to identify a market with consistent median rent growth. Shrinking rental rates are a bad signal to long-term rental investors.

Median Population Age

The median residents’ age that you are hunting for in a good investment environment will be close to the age of waged people. If people are moving into the district, the median age will have no problem staying in the range of the labor force. If you see a high median age, your source of tenants is reducing. This is not promising for the future economy of that city.

Employment Base Diversity

Having multiple employers in the locality makes the market not as unstable. When working individuals are concentrated in a few major enterprises, even a minor problem in their operations could cost you a great deal of tenants and raise your exposure substantially.

Unemployment Rate

It is impossible to maintain a secure rental market when there are many unemployed residents in it. Otherwise profitable businesses lose clients when other companies retrench people. This can result in a large number of retrenchments or shorter work hours in the city. This may increase the instances of missed rents and defaults.

Income Rates

Median household and per capita income will let you know if the tenants that you want are residing in the area. Improving incomes also show you that rental payments can be increased throughout your ownership of the investment property.

Number of New Jobs Created

The more jobs are regularly being generated in a market, the more reliable your renter supply will be. The workers who take the new jobs will need housing. This gives you confidence that you can maintain an acceptable occupancy level and buy more assets.

School Ratings

The quality of school districts has an undeniable impact on housing market worth throughout the community. Highly-ranked schools are a requirement of employers that are considering relocating. Business relocation attracts more tenants. New arrivals who need a residence keep property values strong. You can’t discover a dynamically growing housing market without highly-rated schools.

Property Appreciation Rates

The foundation of a long-term investment plan is to keep the investment property. You need to make sure that your assets will increase in price until you decide to liquidate them. Inferior or declining property worth in a market under evaluation is inadmissible.

Residential units where renters reside in furnished units for less than a month are called short-term rentals. Long-term rentals, such as apartments, charge lower rental rates a night than short-term rentals. These houses might demand more continual upkeep and cleaning.

Average short-term renters are people on vacation, home sellers who are waiting to close on their replacement home, and people traveling for business who want something better than hotel accommodation. House sharing websites such as AirBnB and VRBO have opened doors to numerous residential property owners to venture in the short-term rental industry. A convenient approach to get into real estate investing is to rent a residential property you currently keep for short terms.

The short-term rental business involves interaction with renters more frequently compared to yearly lease units. This leads to the landlord having to frequently handle protests. You may need to defend your legal bases by engaging one of the best Harvey law firms for real estate.

Factors to Consider

Short-Term Rental Income

You must determine how much rental income needs to be created to make your investment worthwhile. A glance at a location’s up-to-date typical short-term rental rates will show you if that is the right market for your plan.

Median Property Prices

When purchasing investment housing for short-term rentals, you have to figure out how much you can afford. To find out if a community has possibilities for investment, examine the median property prices. You can customize your real estate search by estimating median prices in the location’s sub-markets.

Price Per Square Foot

Price per square foot gives a basic picture of property prices when considering comparable properties. If you are comparing similar types of property, like condominiums or detached single-family homes, the price per square foot is more consistent. You can use this information to get a good broad view of home values.

Short-Term Rental Occupancy Rate

The demand for more rentals in an area may be checked by studying the short-term rental occupancy level. A high occupancy rate indicates that a fresh supply of short-term rentals is required. If the rental occupancy levels are low, there is not enough place in the market and you must search elsewhere.

Short-Term Rental Cash-on-Cash Return

To understand if you should put your capital in a particular rental unit or location, look at the cash-on-cash return. Take your estimated Net Operating Income (NOI) and divide it by the cash amount you’re ready to invest. The result you get is a percentage. High cash-on-cash return shows that you will get back your funds faster and the purchase will have a higher return. If you take a loan for part of the investment and spend less of your own cash, you will see a higher cash-on-cash return.

Average Short-Term Rental Capitalization (Cap) Rates

Another metric shows the market value of a property as a revenue-producing asset — average short-term rental capitalization (cap) rate. High cap rates show that rental units are available in that region for decent prices. When cap rates are low, you can assume to pay a higher amount for investment properties in that region. Divide your estimated Net Operating Income (NOI) by the property’s market worth or listing price. The percentage you will receive is the property’s cap rate.

Local Attractions

Short-term renters are often travellers who visit a community to enjoy a yearly important activity or visit unique locations. If an area has places that periodically produce sought-after events, like sports arenas, universities or colleges, entertainment venues, and adventure parks, it can draw people from outside the area on a regular basis. At certain seasons, regions with outdoor activities in mountainous areas, coastal locations, or alongside rivers and lakes will bring in crowds of people who need short-term housing.

The fix and flip strategy involves buying a home that requires improvements or rehabbing, creating added value by upgrading the building, and then liquidating it for a better market worth. The essentials to a profitable investment are to pay a lower price for the house than its existing market value and to carefully compute the amount needed to make it marketable.

It is vital for you to figure out the rates properties are going for in the city. The average number of Days On Market (DOM) for properties listed in the market is important. As a ”rehabber”, you will want to liquidate the fixed-up property right away so you can avoid upkeep spendings that will diminish your profits.

To help distressed residence sellers locate you, place your business in our directories of cash real estate buyers in Harvey IL and real estate investment companies in Harvey IL.

Also, work with Harvey bird dogs for real estate investors. Experts on our list specialize in acquiring desirable investment opportunities while they’re still unlisted.

Factors to Consider

Median Home Price

When you hunt for a good region for home flipping, research the median house price in the district. When purchase prices are high, there might not be a steady source of fixer-upper houses in the location. This is a vital component of a profit-making fix and flip.

When market data indicates a rapid decrease in real property market values, this can point to the accessibility of potential short sale homes. You will hear about possible investments when you join up with Harvey short sale processors. Learn how this happens by reviewing our article ⁠— How Does Buying a Short Sale House Work?.

Property Appreciation Rate

Are real estate market values in the community going up, or going down? Predictable surge in median values reveals a strong investment environment. Real estate prices in the market need to be increasing consistently, not quickly. When you are buying and selling rapidly, an uncertain environment can hurt your venture.

Average Renovation Costs

You’ll want to estimate construction costs in any future investment community. The time it will require for getting permits and the municipality’s rules for a permit request will also affect your plans. If you have to show a stamped set of plans, you will need to include architect’s rates in your costs.

Population Growth

Population growth is a strong gauge of the potential or weakness of the city’s housing market. When there are buyers for your renovated homes, the data will indicate a robust population increase.

Median Population Age

The median population age can also tell you if there are qualified home purchasers in the city. The median age should not be less or higher than that of the regular worker. People in the local workforce are the most reliable house purchasers. Older people are planning to downsize, or relocate into senior-citizen or retiree communities.

Unemployment Rate

You want to have a low unemployment rate in your considered region. It should always be less than the US average. When it is also lower than the state average, that is even better. Without a robust employment base, a region won’t be able to provide you with abundant homebuyers.

Income Rates

Median household and per capita income numbers tell you whether you will find adequate purchasers in that location for your residential properties. Most individuals who buy residential real estate need a mortgage loan. The borrower’s wage will dictate how much they can borrow and if they can buy a house. Median income will let you know whether the standard home purchaser can afford the houses you plan to sell. You also need to see incomes that are growing continually. To keep up with inflation and soaring construction and supply expenses, you have to be able to periodically mark up your rates.

Number of New Jobs Created

Finding out how many jobs are generated per year in the city can add to your assurance in a city’s real estate market. An increasing job market means that a larger number of potential homeowners are confident in buying a house there. Experienced trained professionals looking into purchasing real estate and deciding to settle opt for moving to regions where they won’t be jobless.

Hard Money Loan Rates

Investors who sell rehabbed properties often use hard money loans rather than traditional mortgage. This enables investors to immediately pick up undervalued real estate. Discover private money lenders for real estate in Harvey IL and contrast their interest rates.

Anyone who wants to know about hard money financing products can find what they are as well as the way to use them by studying our article titled What Is Hard Money Financing?.

Wholesaling is a real estate investment approach that requires finding homes that are desirable to real estate investors and signing a purchase contract. When a real estate investor who needs the residential property is spotted, the contract is assigned to the buyer for a fee. The property under contract is bought by the investor, not the real estate wholesaler. The real estate wholesaler doesn’t sell the property itself — they only sell the purchase agreement.

Wholesaling relies on the involvement of a title insurance firm that’s okay with assigning contracts and comprehends how to deal with a double closing. Discover Harvey real estate investor friendly title companies by using our list.

To understand how real estate wholesaling works, read our insightful article What Is Wholesaling in Real Estate Investing?. While you conduct your wholesaling activities, put your company in HouseCashin’s list of Harvey top home wholesalers. This will help your future investor clients locate and contact you.

Factors to Consider

Median Home Prices

Median home prices are instrumental to locating areas where properties are being sold in your investors’ price level. An area that has a large supply of the reduced-value investment properties that your clients require will display a lower median home purchase price.

A quick decline in the price of property might cause the swift appearance of houses with negative equity that are hunted by wholesalers. Short sale wholesalers often reap perks from this method. Nevertheless, be aware of the legal liability. Discover more regarding wholesaling a short sale property with our extensive guide. Once you’re ready to start wholesaling, search through Harvey top short sale law firms as well as Harvey top-rated mortgage foreclosure attorneys directories to discover the appropriate advisor.

Property Appreciation Rate

Median home value movements clearly illustrate the housing value in the market. Real estate investors who need to resell their properties later on, like long-term rental landlords, need a location where real estate prices are growing. Decreasing values illustrate an unequivocally poor rental and housing market and will dismay real estate investors.

Population Growth

Population growth information is a contributing factor that your potential real estate investors will be aware of. If the population is growing, new residential units are required. This combines both leased and resale real estate. When a community is losing people, it doesn’t necessitate more housing and investors will not invest there.

Median Population Age

A strong housing market needs residents who start off renting, then transitioning into homeownership, and then buying up in the residential market. In order for this to take place, there has to be a reliable employment market of prospective tenants and homeowners. That’s why the city’s median age should be the age of skilled workers in the workplace.

Income Rates

The median household and per capita income show steady increases continuously in regions that are good for investment. Surges in lease and listing prices have to be aided by rising wages in the area. Real estate investors stay away from communities with declining population salary growth figures.

Unemployment Rate

The area’s unemployment numbers will be an important factor for any future wholesale property purchaser. Delayed lease payments and default rates are widespread in communities with high unemployment. Long-term real estate investors will not buy a home in a city like this. Renters can’t step up to property ownership and current owners cannot put up for sale their property and go up to a more expensive home. Short-term investors won’t take a chance on getting stuck with real estate they can’t resell fast.

Number of New Jobs Created

Learning how often additional employment opportunities are produced in the community can help you see if the property is situated in a strong housing market. Fresh jobs created mean a large number of employees who need houses to lease and buy. Long-term real estate investors, like landlords, and short-term investors that include flippers, are gravitating to communities with impressive job production rates.

Average Renovation Costs

Rehabilitation expenses will matter to most real estate investors, as they typically acquire inexpensive distressed homes to renovate. When a short-term investor fixes and flips a house, they need to be able to resell it for more than the combined expense for the purchase and the renovations. Below average remodeling costs make a location more desirable for your priority clients — rehabbers and other real estate investors.

Purchasing mortgage notes (loans) pays off when the loan can be acquired for less than the face value. This way, the investor becomes the mortgage lender to the first lender’s debtor.

Performing loans mean mortgage loans where the homeowner is always current on their mortgage payments. Performing loans earn stable income for you. Some investors look for non-performing notes because when he or she can’t successfully re-negotiate the loan, they can always obtain the collateral at foreclosure for a below market price.

At some point, you could create a mortgage note portfolio and notice you are lacking time to oversee it by yourself. At that stage, you may need to employ our directory of Harvey top third party mortgage servicers and reclassify your notes as passive investments.

Should you determine to utilize this method, append your venture to our list of promissory note buyers in Harvey IL. Once you do this, you’ll be seen by the lenders who market profitable investment notes for procurement by investors such as you.

Factors to Consider

Foreclosure Rates

Low foreclosure rates are an indication that the community has investment possibilities for performing note buyers. High rates may signal opportunities for non-performing loan note investors, however they need to be cautious. If high foreclosure rates are causing an underperforming real estate market, it might be challenging to get rid of the property after you seize it through foreclosure.

Foreclosure Laws

Investors need to know their state’s regulations regarding foreclosure prior to buying notes. They will know if their law requires mortgages or Deeds of Trust. You may have to receive the court’s approval to foreclose on a home. You only need to file a notice and begin foreclosure process if you are working with a Deed of Trust.

Mortgage Interest Rates

Acquired mortgage loan notes contain a negotiated interest rate. Your mortgage note investment return will be affected by the mortgage interest rate. Interest rates are significant to both performing and non-performing note investors.

Traditional lenders price dissimilar interest rates in various locations of the US. The stronger risk taken on by private lenders is reflected in higher interest rates for their loans compared to conventional mortgage loans.

A mortgage loan note buyer ought to be aware of the private as well as traditional mortgage loan rates in their areas all the time.

Demographics

A successful mortgage note investment strategy uses an assessment of the area by utilizing demographic information. Investors can interpret a great deal by reviewing the size of the population, how many residents are working, what they make, and how old the citizens are.
Mortgage note investors who specialize in performing mortgage notes choose markets where a high percentage of younger residents maintain good-paying jobs.

Non-performing note investors are looking at similar factors for different reasons. If these investors want to foreclose, they’ll have to have a vibrant real estate market when they unload the REO property.

Property Values

Note holders want to find as much equity in the collateral property as possible. This increases the chance that a possible foreclosure auction will make the lender whole. As loan payments reduce the amount owed, and the value of the property goes up, the homeowner’s equity goes up too.

Property Taxes

Escrows for real estate taxes are normally given to the lender simultaneously with the loan payment. When the property taxes are due, there should be adequate money in escrow to pay them. The lender will have to compensate if the payments cease or they risk tax liens on the property. If a tax lien is put in place, it takes a primary position over the lender’s loan.

If a market has a record of growing property tax rates, the combined home payments in that region are regularly expanding. Homeowners who are having difficulty handling their loan payments could drop farther behind and eventually default.

Real Estate Market Strength

A location with appreciating property values has good potential for any mortgage note buyer. It’s important to understand that if you have to foreclose on a collateral, you won’t have difficulty getting a good price for the property.

A vibrant real estate market may also be a profitable community for making mortgage notes. For experienced investors, this is a profitable portion of their business plan.

Some real estate investment businesses are formed as a trust termed Real Estate Investment Trusts or REITs. Before REITs were created, real estate investing was too costly for the majority of people. Many investors currently are capable of investing in a REIT.

REIT investing is considered passive investing. REITs handle investors’ exposure with a diversified selection of assets. Investors are able to unload their REIT shares whenever they need. One thing you can’t do with REIT shares is to choose the investment real estate properties. You are restricted to the REIT’s portfolio of properties for investment.

Mutual funds that hold shares of real estate companies are referred to as real estate investment funds. The investment assets are not owned by the fund — they’re held by the companies in which the fund invests. This is an additional way for passive investors to spread their portfolio with real estate avoiding the high entry-level expense or risks. Real estate investment funds are not required to pay dividends like a REIT. As with other stocks, investment funds’ values rise and go down with their share market value.

You may pick a fund that concentrates on a selected kind of real estate you are familiar with, but you don’t get to choose the geographical area of every real estate investment. You have to depend on the fund’s directors to determine which locations and properties are picked for investment.