Ultimate Lexington Real Estate Investing Guide for 2024

BRRRR means “Buy, Rehab, Rent, Refinance, Repeat”. BRRRR is a plan for continuous expansion. It is critical that you be able to obtain a “cash-out” refinance loan for the strategy to work.

When you are done with rehabbing the house, the market value should be more than your total acquisition and rehab costs. After that, you remove the equity you created out of the property in a “cash-out” refinance. You buy your next asset with the cash-out funds and start all over again. You add improving assets to your portfolio and lease revenue to your cash flow.

When your investment property portfolio is big enough, you might delegate its oversight and enjoy passive cash flow. Locate the best Lexington property management companies by using our list.

Factors to Consider

Population Growth

Population expansion or decline shows you if you can depend on good results from long-term investments. When you discover robust population growth, you can be sure that the area is drawing potential tenants to the location. Businesses view this as an appealing area to situate their company, and for workers to move their families. A rising population constructs a reliable foundation of tenants who can handle rent increases, and a robust seller’s market if you decide to unload your investment properties.

Property Taxes

Property taxes, similarly to insurance and upkeep spendings, can vary from place to place and should be looked at cautiously when assessing possible profits. Excessive real estate tax rates will decrease a real estate investor’s returns. If property tax rates are unreasonable in a specific city, you probably want to look somewhere else.

Price to Rent Ratio

The price to rent ratio (p/r) is a signal of how high of a rent can be demanded in comparison to the value of the asset. An investor will not pay a large price for a house if they can only demand a limited rent not letting them to pay the investment off in a suitable time. You will prefer to see a low p/r to be confident that you can price your rents high enough to reach acceptable returns.

Median Gross Rents

Median gross rents are a clear illustration of the strength of a rental market. You are trying to discover a market with repeating median rent growth. Reducing rents are a bad signal to long-term rental investors.

Median Population Age

The median citizens’ age that you are on the hunt for in a robust investment environment will be similar to the age of waged adults. This could also signal that people are relocating into the region. If working-age people are not coming into the region to succeed retiring workers, the median age will go up. An active investing environment can’t be sustained by retiring workers.

Employment Base Diversity

Accommodating different employers in the city makes the economy not as unstable. If there are only one or two dominant employers, and one of such moves or closes down, it will cause you to lose tenants and your property market rates to decrease.

Unemployment Rate

It is impossible to maintain a reliable rental market if there are many unemployed residents in it. Non-working individuals cannot buy goods or services. Those who continue to have jobs may discover their hours and salaries decreased. This could result in late rents and tenant defaults.

Income Rates

Median household and per capita income will reflect if the renters that you prefer are living in the area. Current salary statistics will communicate to you if wage raises will enable you to raise rents to meet your profit estimates.

Number of New Jobs Created

The more jobs are regularly being produced in a region, the more stable your tenant pool will be. More jobs mean additional renters. This enables you to acquire more rental properties and replenish current vacancies.

School Ratings

Community schools will have a significant influence on the real estate market in their location. Highly-respected schools are a requirement of employers that are considering relocating. Dependable renters are a by-product of a steady job market. Homeowners who move to the city have a good influence on real estate values. Good schools are an important factor for a vibrant property investment market.

Property Appreciation Rates

Property appreciation rates are an integral ingredient of your long-term investment approach. You have to be certain that your investment assets will appreciate in market value until you want to move them. Small or dropping property appreciation rates will exclude a location from consideration.

Residential real estate where renters reside in furnished accommodations for less than thirty days are referred to as short-term rentals. Short-term rentals charge more rent a night than in long-term rental properties. Because of the high number of renters, short-term rentals necessitate more recurring upkeep and cleaning.

Average short-term renters are holidaymakers, home sellers who are relocating, and people traveling on business who want something better than a hotel room. Any property owner can turn their home into a short-term rental unit with the assistance provided by online home-sharing sites like VRBO and AirBnB. Short-term rentals are deemed as a smart way to kick off investing in real estate.

Vacation rental unit owners necessitate interacting one-on-one with the occupants to a greater degree than the owners of annually rented units. Because of this, owners manage difficulties regularly. You might want to protect your legal exposure by working with one of the good Lexington real estate attorneys.

Factors to Consider

Short-Term Rental Income

You must find out how much rental income has to be earned to make your investment successful. A market’s short-term rental income rates will promptly tell you if you can predict to achieve your projected income figures.

Median Property Prices

You also need to know the amount you can manage to invest. To check whether a region has potential for investment, examine the median property prices. You can fine-tune your property hunt by looking at median prices in the region’s sub-markets.

Price Per Square Foot

Price per square foot can be confusing if you are examining different properties. If you are examining the same kinds of real estate, like condos or separate single-family homes, the price per square foot is more reliable. If you take this into account, the price per sq ft may give you a basic view of real estate prices.

Short-Term Rental Occupancy Rate

The percentage of short-term rental properties that are currently occupied in a community is vital information for an investor. A high occupancy rate indicates that an additional amount of short-term rentals is required. Weak occupancy rates communicate that there are already enough short-term rentals in that city.

Short-Term Rental Cash-on-Cash Return

A short-term rental’s cash-on-cash return can inform you if the property is a prudent use of your money. You can compute the cash-on-cash return by determining your Net Operating Income (NOI) and dividing it by your cash being invested. The return is shown as a percentage. If an investment is high-paying enough to recoup the amount invested soon, you will get a high percentage. If you borrow part of the investment amount and use less of your own money, you will realize a higher cash-on-cash return.

Average Short-Term Rental Capitalization (Cap) Rates

This metric compares rental property worth to its annual revenue. Basically, the less money a unit costs (or is worth), the higher the cap rate will be. Low cap rates show higher-priced rental units. Divide your expected Net Operating Income (NOI) by the investment property’s market worth or asking price. This gives you a percentage that is the year-over-year return, or cap rate.

Local Attractions

Short-term renters are often people who come to a city to enjoy a recurring special activity or visit places of interest. This includes top sporting events, children’s sports contests, colleges and universities, huge concert halls and arenas, fairs, and theme parks. At certain occasions, locations with outside activities in the mountains, seaside locations, or alongside rivers and lakes will bring in a throng of visitors who want short-term housing.

When a property investor acquires a property under market value, renovates it so that it becomes more valuable, and then sells it for a profit, they are referred to as a fix and flip investor. The secrets to a lucrative investment are to pay a lower price for the home than its current market value and to carefully calculate the budget you need to make it sellable.

It’s crucial for you to understand what properties are being sold for in the city. The average number of Days On Market (DOM) for homes sold in the area is crucial. Disposing of the property promptly will keep your costs low and guarantee your profitability.

In order that home sellers who have to sell their property can readily discover you, showcase your availability by using our list of the best cash real estate buyers in Lexington IL along with the best real estate investors in Lexington IL.

Additionally, look for the best property bird dogs in Lexington IL. Professionals in our directory specialize in procuring little-known investments while they’re still under the radar.

Factors to Consider

Median Home Price

Median real estate price data is a key benchmark for estimating a future investment market. When purchase prices are high, there might not be a stable source of run down residential units available. This is a basic element of a fix and flip market.

When you see a sharp decrease in home market values, this could indicate that there are conceivably homes in the region that will work for a short sale. Real estate investors who work with short sale specialists in Lexington IL receive regular notices concerning potential investment real estate. Discover how this happens by reading our article ⁠— How to Buy a Short Sale Home Fast.

Property Appreciation Rate

The shifts in real property market worth in a region are crucial. You are eyeing for a consistent growth of local housing values. Erratic market value fluctuations are not good, even if it’s a substantial and sudden growth. Purchasing at an inconvenient point in an unsteady market condition can be catastrophic.

Average Renovation Costs

A comprehensive analysis of the area’s renovation costs will make a huge impact on your location choice. The manner in which the local government goes about approving your plans will affect your project too. To make a detailed budget, you’ll want to know whether your plans will be required to involve an architect or engineer.

Population Growth

Population increase figures provide a look at housing need in the community. When there are buyers for your restored real estate, the data will show a positive population growth.

Median Population Age

The median residents’ age is a contributing factor that you may not have taken into consideration. If the median age is the same as the one of the typical worker, it’s a good sign. People in the local workforce are the most dependable home purchasers. The needs of retirees will most likely not be a part of your investment venture plans.

Unemployment Rate

You need to have a low unemployment level in your target community. An unemployment rate that is less than the US median is a good sign. When the city’s unemployment rate is lower than the state average, that is a sign of a desirable financial market. In order to purchase your improved property, your clients are required to work, and their clients as well.

Income Rates

Median household and per capita income levels tell you whether you will see adequate buyers in that city for your homes. When people acquire a home, they normally have to borrow money for the purchase. Homebuyers’ ability to get approval for a mortgage depends on the level of their income. The median income stats show you if the city is good for your investment endeavours. Look for communities where wages are increasing. To keep up with inflation and rising building and supply expenses, you should be able to periodically raise your rates.

Number of New Jobs Created

The number of jobs created on a regular basis shows whether income and population growth are viable. More citizens acquire homes if their local financial market is generating jobs. Qualified skilled workers taking into consideration buying real estate and settling choose moving to cities where they won’t be out of work.

Hard Money Loan Rates

Investors who sell rehabbed houses often utilize hard money funding instead of regular mortgage. Doing this lets investors negotiate lucrative deals without hindrance. Look up Lexington private money lenders and analyze financiers’ fees.

People who aren’t well-versed concerning hard money loans can discover what they ought to understand with our guide for newbie investors — What Is a Private Money Lender?.

As a real estate wholesaler, you sign a contract to buy a residential property that other real estate investors will need. When an investor who wants the property is found, the purchase contract is sold to the buyer for a fee. The real buyer then completes the acquisition. The wholesaler does not sell the residential property — they sell the rights to buy it.

Wholesaling depends on the assistance of a title insurance firm that is experienced with assigning contracts and comprehends how to work with a double closing. Find Lexington title companies for wholesalers by reviewing our directory.

To learn how real estate wholesaling works, read our detailed article Complete Guide to Real Estate Wholesaling as an Investment Strategy. While you conduct your wholesaling business, put your firm in HouseCashin’s list of Lexington top wholesale property investors. That way your desirable customers will see your availability and reach out to you.

Factors to Consider

Median Home Prices

Median home prices in the community will inform you if your ideal price point is achievable in that location. A market that has a substantial supply of the marked-down investment properties that your clients want will display a low median home purchase price.

A fast downturn in housing prices could lead to a high selection of ‘underwater’ residential units that short sale investors search for. Short sale wholesalers often gain benefits using this strategy. But it also produces a legal liability. Learn more concerning wholesaling short sales with our exhaustive instructions. Once you choose to give it a try, make sure you have one of short sale lawyers in Lexington IL and property foreclosure attorneys in Lexington IL to consult with.

Property Appreciation Rate

Property appreciation rate enhances the median price stats. Investors who want to sit on investment properties will have to know that home values are regularly increasing. A dropping median home price will illustrate a vulnerable rental and housing market and will disappoint all kinds of real estate investors.

Population Growth

Population growth stats are something that your future real estate investors will be familiar with. An expanding population will need new housing. There are more people who lease and more than enough clients who buy houses. When a location is losing people, it does not necessitate more housing and investors will not look there.

Median Population Age

Investors want to see a steady property market where there is a substantial supply of tenants, newbie homebuyers, and upwardly mobile residents switching to larger homes. This requires a strong, constant workforce of citizens who feel confident to buy up in the real estate market. A place with these features will show a median population age that is equivalent to the working person’s age.

Income Rates

The median household and per capita income will be growing in a strong housing market that investors prefer to work in. Income hike proves a city that can manage lease rate and real estate listing price increases. Experienced investors stay out of locations with unimpressive population salary growth stats.

Unemployment Rate

Investors whom you offer to purchase your contracts will consider unemployment statistics to be a significant bit of knowledge. High unemployment rate causes many renters to make late rent payments or default altogether. This impacts long-term investors who intend to lease their property. Tenants cannot transition up to homeownership and current owners cannot sell their property and move up to a larger house. This makes it hard to reach fix and flip investors to buy your buying contracts.

Number of New Jobs Created

The number of fresh jobs being generated in the market completes a real estate investor’s analysis of a future investment spot. Workers settle in a community that has new job openings and they require a place to reside. This is good for both short-term and long-term real estate investors whom you depend on to buy your sale contracts.

Average Renovation Costs

Renovation costs will be essential to most real estate investors, as they typically buy inexpensive distressed properties to renovate. The price, plus the costs of rehabilitation, should amount to lower than the After Repair Value (ARV) of the property to allow for profit. Lower average renovation costs make a market more desirable for your top customers — flippers and landlords.

This strategy means buying a loan (mortgage note) from a mortgage holder for less than the balance owed. The client makes subsequent loan payments to the investor who is now their current lender.

Performing notes are mortgage loans where the borrower is consistently on time with their mortgage payments. They give you long-term passive income. Non-performing mortgage notes can be re-negotiated or you could acquire the property for less than face value by conducting a foreclosure process.

At some time, you may build a mortgage note collection and notice you are needing time to service it on your own. At that time, you might want to utilize our directory of Lexington top loan servicers and reclassify your notes as passive investments.

Should you choose to take on this investment strategy, you should put your venture in our list of the best mortgage note buying companies in Lexington IL. Appearing on our list places you in front of lenders who make desirable investment opportunities available to note buyers such as yourself.

Factors to Consider

Foreclosure Rates

Performing loan buyers try to find areas with low foreclosure rates. If the foreclosures are frequent, the neighborhood might nonetheless be desirable for non-performing note investors. However, foreclosure rates that are high often indicate a weak real estate market where liquidating a foreclosed home will be a problem.

Foreclosure Laws

Note investors should know the state’s laws concerning foreclosure before pursuing this strategy. Are you faced with a Deed of Trust or a mortgage? You might have to get the court’s approval to foreclose on a home. You only need to file a public notice and initiate foreclosure steps if you are using a Deed of Trust.

Mortgage Interest Rates

Mortgage note investors inherit the interest rate of the mortgage loan notes that they obtain. This is a significant factor in the profits that lenders earn. Interest rates impact the plans of both types of note investors.

Traditional interest rates can be different by as much as a quarter of a percent across the country. Private loan rates can be moderately more than conventional loan rates considering the greater risk taken on by private mortgage lenders.

Note investors should consistently know the prevailing market interest rates, private and conventional, in possible note investment markets.

Demographics

A lucrative mortgage note investment strategy incorporates an assessment of the region by using demographic data. It is critical to find out whether enough residents in the city will continue to have good paying jobs and wages in the future.
Performing note investors want borrowers who will pay without delay, developing a stable income flow of loan payments.

Mortgage note investors who acquire non-performing mortgage notes can also make use of dynamic markets. In the event that foreclosure is necessary, the foreclosed property is more easily unloaded in a strong real estate market.

Property Values

The greater the equity that a homebuyer has in their home, the more advantageous it is for their mortgage note owner. This improves the chance that a possible foreclosure auction will make the lender whole. As loan payments lessen the balance owed, and the value of the property goes up, the borrower’s equity grows.

Property Taxes

Most homeowners pay real estate taxes to lenders in monthly installments along with their loan payments. This way, the mortgage lender makes certain that the taxes are submitted when due. The lender will need to compensate if the house payments halt or the lender risks tax liens on the property. If property taxes are delinquent, the government’s lien supersedes any other liens to the front of the line and is satisfied first.

If property taxes keep increasing, the customer’s house payments also keep growing. Delinquent customers may not be able to keep up with rising payments and could stop paying altogether.

Real Estate Market Strength

A city with appreciating property values offers strong potential for any mortgage note investor. It’s crucial to know that if you are required to foreclose on a collateral, you won’t have trouble obtaining an appropriate price for it.

Vibrant markets often present opportunities for private investors to originate the initial mortgage loan themselves. This is a profitable stream of income for successful investors.

Some real estate investment companies are built as trusts called Real Estate Investment Trusts or REITs. This was originally invented as a way to enable the ordinary person to invest in real property. The typical investor has the funds to invest in a REIT.

Shareholders’ involvement in a REIT falls under passive investment. Investment exposure is diversified across a package of investment properties. Participants have the capability to liquidate their shares at any time. However, REIT investors do not have the option to pick particular investment properties or locations. You are restricted to the REIT’s selection of properties for investment.

Mutual funds that hold shares of real estate businesses are referred to as real estate investment funds. The fund does not own real estate — it holds shares in real estate firms. Investment funds may be a cost-effective method to combine real estate in your allocation of assets without needless exposure. Where REITs have to disburse dividends to its members, funds don’t. The return to investors is generated by changes in the value of the stock.

You may pick a fund that concentrates on a selected kind of real estate you’re familiar with, but you don’t get to determine the market of every real estate investment. As passive investors, fund members are content to let the administration of the fund make all investment decisions.