Ultimate Lexington Real Estate Investing Guide for 2024

BRRRR stands for “Buy, Rehab, Rent, Refinance, Repeat”. When you want to grow your investments, the BRRRR is a good method to use. This method hinges on your ability to extract cash out when you refinance.

When you have concluded improving the property, its market value has to be higher than your total purchase and fix-up spendings. The rental is refinanced based on the ARV and the difference, or equity, is given to you in cash. You utilize that capital to purchase an additional asset and the process begins anew. You buy additional rental homes and constantly expand your lease revenues.

If an investor owns a substantial collection of investment properties, it makes sense to hire a property manager and designate a passive income source. Find the best real estate management companies in Lexington MS by looking through our list.

Factors to Consider

Population Growth

The rise or downturn of a market’s population is an accurate benchmark of the area’s long-term attractiveness for rental property investors. If the population growth in an area is robust, then additional renters are definitely moving into the area. The community is attractive to employers and workers to situate, work, and create families. This means stable tenants, higher lease revenue, and a greater number of potential homebuyers when you need to sell the asset.

Property Taxes

Real estate taxes, upkeep, and insurance expenses are investigated by long-term rental investors for forecasting costs to assess if and how the project will pay off. Rental homes located in unreasonable property tax cities will provide lower returns. Unreasonable property tax rates may indicate a fluctuating market where costs can continue to expand and must be treated as a red flag.

Price to Rent Ratio

The price to rent ratio (p/r) is a signal of how high of a rent can be demanded compared to the value of the investment property. An investor can not pay a large sum for a property if they can only charge a modest rent not allowing them to repay the investment in a reasonable time. The less rent you can demand the higher the price-to-rent ratio, with a low p/r showing a more robust rent market.

Median Gross Rents

Median gross rents let you see whether a location’s lease market is solid. Median rents should be going up to warrant your investment. Declining rents are a red flag to long-term rental investors.

Median Population Age

The median residents’ age that you are on the hunt for in a dynamic investment market will be close to the age of salaried people. You’ll discover this to be factual in markets where people are relocating. When working-age people are not entering the market to follow retirees, the median age will increase. A dynamic economy cannot be supported by retired people.

Employment Base Diversity

A diversified supply of enterprises in the area will expand your chances of strong returns. When the region’s workpeople, who are your renters, are hired by a diverse combination of employers, you will not lose all all tenants at the same time (together with your property’s market worth), if a major enterprise in the market goes bankrupt.

Unemployment Rate

You will not have a stable rental income stream in a location with high unemployment. People who don’t have a job can’t buy goods or services. The remaining workers could discover their own wages reduced. Existing tenants might fall behind on their rent payments in such cases.

Income Rates

Median household and per capita income level is a valuable indicator to help you find the areas where the tenants you are looking for are living. Rising salaries also show you that rental rates can be hiked throughout your ownership of the investment property.

Number of New Jobs Created

An increasing job market results in a constant pool of renters. A higher number of jobs mean a higher number of tenants. This allows you to acquire more lease properties and replenish current vacant units.

School Ratings

Community schools will cause a strong effect on the property market in their neighborhood. Well-ranked schools are a prerequisite for businesses that are considering relocating. Moving businesses relocate and attract prospective tenants. Homeowners who move to the region have a positive influence on property prices. Superior schools are an essential ingredient for a strong real estate investment market.

Property Appreciation Rates

High property appreciation rates are a necessity for a successful long-term investment. You need to be assured that your assets will grow in market value until you need to liquidate them. Low or decreasing property appreciation rates will exclude a location from your list.

A short-term rental is a furnished residence where a renter stays for shorter than a month. Long-term rental units, such as apartments, require lower rent a night than short-term rentals. These homes might involve more continual maintenance and sanitation.

Usual short-term renters are vacationers, home sellers who are waiting to close on their replacement home, and people traveling for business who want a more homey place than a hotel room. Regular real estate owners can rent their homes on a short-term basis with platforms like AirBnB and VRBO. A simple technique to get started on real estate investing is to rent a condo or house you currently possess for short terms.

Short-term rentals require dealing with occupants more repeatedly than long-term rental units. This means that property owners handle disputes more regularly. Think about covering yourself and your properties by adding one of attorneys specializing in real estate in Lexington MS to your network of experts.

Factors to Consider

Short-Term Rental Income

You should calculate the amount of rental revenue you are looking for based on your investment budget. Being aware of the average rate of rental fees in the community for short-term rentals will help you pick a good city to invest.

Median Property Prices

You also must decide the budget you can spare to invest. Search for communities where the budget you need matches up with the current median property prices. You can also make use of median market worth in localized neighborhoods within the market to select communities for investing.

Price Per Square Foot

Price per sq ft can be inaccurate if you are comparing different buildings. When the designs of available properties are very different, the price per sq ft might not help you get an accurate comparison. If you take this into consideration, the price per sq ft may give you a general estimation of real estate prices.

Short-Term Rental Occupancy Rate

The need for additional rental properties in a city may be verified by examining the short-term rental occupancy level. A city that requires new rentals will have a high occupancy level. Weak occupancy rates indicate that there are already too many short-term rental properties in that city.

Short-Term Rental Cash-on-Cash Return

Cash-on-cash return is a means to estimate the value of an investment. You can determine the cash-on-cash return by taking your Net Operating Income (NOI) and dividing it by the cash you are putting in. The answer is a percentage. The higher the percentage, the more quickly your investment funds will be repaid and you will begin realizing profits. Loan-assisted investments will have a stronger cash-on-cash return because you’re using less of your capital.

Average Short-Term Rental Capitalization (Cap) Rates

This criterion shows the comparability of investment property worth to its annual revenue. Generally, the less money an investment property will cost (or is worth), the higher the cap rate will be. If properties in a community have low cap rates, they usually will cost more money. You can obtain the cap rate for potential investment property by dividing the Net Operating Income (NOI) by the market worth or asking price of the residential property. This gives you a percentage that is the per-annum return, or cap rate.

Local Attractions

Big public events and entertainment attractions will entice visitors who want short-term rental units. If a city has places that periodically produce sought-after events, such as sports stadiums, universities or colleges, entertainment venues, and theme parks, it can attract people from out of town on a constant basis. At certain periods, areas with outside activities in mountainous areas, at beach locations, or alongside rivers and lakes will draw large numbers of visitors who want short-term rental units.

The fix and flip investment plan requires buying a home that requires improvements or restoration, putting added value by upgrading the building, and then liquidating it for its full market value. Your evaluation of renovation costs has to be precise, and you need to be capable of acquiring the property below market worth.

It is critical for you to be aware of what houses are selling for in the market. Select a region with a low average Days On Market (DOM) indicator. Disposing of real estate without delay will keep your costs low and maximize your profitability.

To help motivated home sellers locate you, list your company in our directories of cash real estate buyers in Lexington MS and property investment firms in Lexington MS.

In addition, hunt for property bird dogs in Lexington MS. Experts discovered on our website will help you by rapidly locating potentially profitable deals ahead of them being listed.

Factors to Consider

Median Home Price

The area’s median home value will help you determine a desirable neighborhood for flipping houses. If values are high, there might not be a steady amount of fixer-upper residential units in the area. This is a key ingredient of a cost-effective fix and flip.

When regional data shows a rapid drop in property market values, this can highlight the availability of potential short sale properties. Real estate investors who work with short sale facilitators in Lexington MS receive continual notifications about possible investment real estate. You will find additional information regarding short sales in our guide ⁠— How to Buy a Pre-Foreclosure Short Sale Home?.

Property Appreciation Rate

Are home prices in the community moving up, or moving down? You’re searching for a stable increase of the city’s home market rates. Rapid price growth may show a value bubble that isn’t practical. You could wind up buying high and liquidating low in an unstable market.

Average Renovation Costs

Look carefully at the possible rehab spendings so you will know if you can achieve your projections. The manner in which the local government processes your application will have an effect on your investment too. To draft a detailed financial strategy, you’ll need to find out whether your plans will be required to use an architect or engineer.

Population Growth

Population growth statistics provide a look at housing need in the region. When the population isn’t going up, there is not going to be a sufficient pool of homebuyers for your real estate.

Median Population Age

The median population age is a factor that you might not have included in your investment study. When the median age is equal to the one of the average worker, it is a good indication. People in the area’s workforce are the most stable home buyers. People who are preparing to leave the workforce or are retired have very specific housing requirements.

Unemployment Rate

When checking a region for real estate investment, look for low unemployment rates. It must always be less than the US average. A very strong investment market will have an unemployment rate less than the state’s average. If you don’t have a robust employment environment, a city cannot supply you with enough home purchasers.

Income Rates

Median household and per capita income are a reliable indicator of the scalability of the housing environment in the community. When families acquire a house, they typically need to get a loan for the home purchase. The borrower’s salary will determine how much they can borrow and if they can buy a house. Median income will let you analyze whether the regular home purchaser can afford the houses you plan to offer. Specifically, income increase is critical if you want to scale your business. Building expenses and housing purchase prices rise from time to time, and you want to be certain that your target customers’ salaries will also climb up.

Number of New Jobs Created

The number of employment positions created on a steady basis shows whether income and population growth are viable. More citizens buy homes when their community’s economy is generating jobs. With a higher number of jobs generated, more prospective buyers also migrate to the area from other places.

Hard Money Loan Rates

People who purchase, renovate, and sell investment properties are known to enlist hard money instead of typical real estate loans. This plan enables investors complete profitable deals without delay. Find the best private money lenders in Lexington MS so you may review their fees.

If you are inexperienced with this funding product, learn more by using our article — What Is a Hard Money Loan in Real Estate?.

As a real estate wholesaler, you sign a sale and purchase agreement to purchase a house that some other investors will be interested in. However you do not purchase the house: after you have the property under contract, you get a real estate investor to take your place for a price. The investor then settles the transaction. You are selling the rights to the contract, not the property itself.

Wholesaling depends on the participation of a title insurance firm that is comfortable with assigning purchase contracts and understands how to proceed with a double closing. Search for title companies for wholesalers in Lexington MS that we collected for you.

Read more about the way to wholesale property from our comprehensive guide — Wholesale Real Estate Investing 101 for Beginners. When pursuing this investment plan, add your firm in our directory of the best property wholesalers in Lexington MS. That way your desirable audience will learn about you and reach out to you.

Factors to Consider

Median Home Prices

Median home prices in the region will inform you if your preferred price level is possible in that location. Lower median purchase prices are a solid sign that there are plenty of houses that might be purchased under market worth, which investors have to have.

A fast decrease in the market value of real estate could generate the abrupt availability of properties with negative equity that are desired by wholesalers. Short sale wholesalers frequently gain advantages using this method. Nonetheless, there might be challenges as well. Get more details on how to wholesale a short sale house with our exhaustive article. When you’re ready to begin wholesaling, look through Lexington top short sale real estate attorneys as well as Lexington top-rated foreclosure attorneys lists to locate the appropriate advisor.

Property Appreciation Rate

Median home purchase price dynamics are also important. Some investors, such as buy and hold and long-term rental investors, particularly want to find that home values in the area are growing over time. Both long- and short-term real estate investors will ignore a community where housing prices are going down.

Population Growth

Population growth data is something that real estate investors will consider carefully. A growing population will require additional residential units. There are more people who lease and more than enough clients who purchase houses. If a community isn’t multiplying, it doesn’t need new residential units and investors will search in other areas.

Median Population Age

A dynamic housing market needs people who start off renting, then shifting into homebuyers, and then moving up in the residential market. To allow this to be possible, there has to be a steady workforce of prospective renters and homebuyers. That’s why the area’s median age needs to be the age of skilled workers in the employment market.

Income Rates

The median household and per capita income should be improving in a vibrant real estate market that real estate investors want to work in. If renters’ and home purchasers’ wages are getting bigger, they can contend with rising rental rates and residential property prices. Successful investors stay away from communities with poor population wage growth statistics.

Unemployment Rate

Investors will pay close attention to the city’s unemployment rate. Renters in high unemployment locations have a tough time paying rent on schedule and a lot of them will stop making payments altogether. Long-term investors won’t acquire a home in a community like this. Tenants cannot move up to ownership and existing homeowners can’t liquidate their property and shift up to a more expensive house. Short-term investors will not risk being stuck with a property they cannot liquidate without delay.

Number of New Jobs Created

The frequency of jobs appearing annually is an essential component of the residential real estate picture. Job generation implies a higher number of employees who have a need for housing. This is beneficial for both short-term and long-term real estate investors whom you rely on to buy your contracts.

Average Renovation Costs

An important consideration for your client investors, particularly fix and flippers, are rehab costs in the location. When a short-term investor rehabs a house, they want to be able to sell it for a larger amount than the combined cost of the acquisition and the upgrades. Below average improvement expenses make a community more profitable for your main customers — flippers and rental property investors.

Buying mortgage notes (loans) works when the mortgage note can be bought for a lower amount than the face value. When this happens, the note investor becomes the debtor’s lender.

Performing notes are mortgage loans where the homeowner is consistently current on their payments. Performing notes earn repeating income for you. Investors also obtain non-performing loans that they either re-negotiate to assist the borrower or foreclose on to buy the collateral less than actual worth.

At some point, you could accrue a mortgage note collection and start needing time to handle it by yourself. In this case, you could enlist one of loan servicing companies in Lexington MS that would basically convert your portfolio into passive income.

When you decide to adopt this investment model, you ought to put your business in our list of the best real estate note buyers in Lexington MS. Being on our list sets you in front of lenders who make profitable investment possibilities available to note investors such as you.

Factors to Consider

Foreclosure Rates

Performing note investors are on lookout for markets showing low foreclosure rates. Non-performing loan investors can carefully take advantage of locations that have high foreclosure rates as well. If high foreclosure rates are causing a weak real estate market, it could be challenging to resell the collateral property if you foreclose on it.

Foreclosure Laws

It is imperative for note investors to know the foreclosure regulations in their state. They will know if their law dictates mortgage documents or Deeds of Trust. A mortgage requires that the lender goes to court for authority to start foreclosure. You don’t need the judge’s agreement with a Deed of Trust.

Mortgage Interest Rates

Note investors take over the interest rate of the mortgage loan notes that they purchase. This is an important factor in the returns that lenders reach. Interest rates are important to both performing and non-performing mortgage note investors.

The mortgage loan rates quoted by traditional lenders are not identical in every market. The stronger risk taken on by private lenders is accounted for in bigger mortgage loan interest rates for their mortgage loans compared to conventional mortgage loans.

A note buyer ought to be aware of the private and traditional mortgage loan rates in their markets at any given time.

Demographics

A community’s demographics data assist mortgage note buyers to focus their work and properly use their assets. The location’s population increase, unemployment rate, employment market increase, income standards, and even its median age contain usable information for note investors.
Performing note investors want customers who will pay without delay, generating a repeating income source of mortgage payments.

Note investors who acquire non-performing mortgage notes can also take advantage of growing markets. If these investors want to foreclose, they’ll have to have a vibrant real estate market to liquidate the repossessed property.

Property Values

Lenders want to find as much home equity in the collateral as possible. If the property value is not significantly higher than the mortgage loan balance, and the mortgage lender needs to start foreclosure, the home might not sell for enough to repay the lender. As loan payments lessen the balance owed, and the value of the property goes up, the homeowner’s equity goes up too.

Property Taxes

Usually, mortgage lenders receive the property taxes from the customer every month. When the taxes are payable, there needs to be enough funds being held to take care of them. The mortgage lender will have to make up the difference if the payments stop or the investor risks tax liens on the property. If a tax lien is put in place, it takes first position over the mortgage lender’s note.

Since tax escrows are included with the mortgage payment, rising property taxes mean higher house payments. Borrowers who have difficulty handling their loan payments might fall farther behind and sooner or later default.

Real Estate Market Strength

A location with appreciating property values promises excellent potential for any note investor. It is crucial to know that if you have to foreclose on a property, you will not have trouble getting an appropriate price for the property.

A vibrant market can also be a lucrative place for making mortgage notes. This is a good stream of income for experienced investors.

A trust owning income-generating real estate properties and that offers shares to others is a REIT — Real Estate Investment Trust. This was first invented as a method to permit the ordinary person to invest in real property. Most people currently are capable of investing in a REIT.

REIT investing is considered passive investing. Investment exposure is spread throughout a group of investment properties. Investors can liquidate their REIT shares anytime they choose. One thing you cannot do with REIT shares is to choose the investment real estate properties. Their investment is confined to the real estate properties owned by the REIT.

A Real Estate Investment Fund is a mutual fund that owns stocks of real estate firms. The fund doesn’t own properties — it holds interest in real estate companies. These funds make it possible for a wider variety of investors to invest in real estate properties. Fund shareholders might not get usual disbursements the way that REIT shareholders do. The profit to investors is created by appreciation in the value of the stock.

You can pick a fund that concentrates on specific segments of the real estate industry but not specific locations for individual real estate investment. Your choice as an investor is to choose a fund that you believe in to supervise your real estate investments.