Ultimate Scott County Real Estate Investing Guide for 2024

BRRRR is an abbreviation of “Buy, Rehab, Rent, Refinance, Repeat”. When you plan to grow your investments, the BRRRR is a proven plan to follow. A vital part of this strategy is to be able to do a “cash-out” mortgage refinance.

When you have concluded repairing the rental, its value must be higher than your total purchase and rehab costs. The home is refinanced using the ARV and the difference, or equity, comes to you in cash. You buy your next rental with the cash-out sum and begin anew. This program helps you to steadily add to your portfolio and your investment income.

When your investment real estate portfolio is large enough, you can contract out its management and receive passive cash flow. Discover the best property management companies in Scott County IL by looking through our directory.

Factors to Consider

Population Growth

Population increase or contraction shows you if you can depend on good returns from long-term property investments. If you find vibrant population increase, you can be certain that the market is attracting potential renters to it. Employers see this community as promising area to move their company, and for workers to relocate their families. Rising populations maintain a reliable renter mix that can afford rent growth and home purchasers who assist in keeping your investment property values high.

Property Taxes

Real estate taxes, ongoing upkeep spendings, and insurance specifically influence your revenue. Steep real estate taxes will negatively impact a real estate investor’s returns. Areas with high property tax rates are not a dependable situation for short- or long-term investment and should be avoided.

Price to Rent Ratio

The price to rent ratio (p/r) is a comparison of median property values and median rental rates that will indicate how high of a rent the market can handle. If median home values are steep and median rents are low — a high p/r, it will take more time for an investment to repay your costs and reach good returns. A higher p/r tells you that you can demand less rent in that location, a lower one informs you that you can charge more.

Median Gross Rents

Median gross rents are a specific benchmark of the desirability of a lease market under examination. You should find a location with stable median rent expansion. You will not be able to realize your investment targets in an area where median gross rental rates are shrinking.

Median Population Age

Median population age in a reliable long-term investment market must reflect the usual worker’s age. You will find this to be factual in communities where people are migrating. A high median age shows that the existing population is aging out with no replacement by younger people migrating there. That is a poor long-term economic prospect.

Employment Base Diversity

A diverse employment base is something a smart long-term rental property owner will look for. When your tenants are concentrated in a couple of dominant businesses, even a slight disruption in their business could cost you a lot of tenants and increase your risk significantly.

Unemployment Rate

High unemployment leads to fewer tenants and an unsafe housing market. Out-of-work people cease being customers of yours and of other businesses, which creates a ripple effect throughout the region. The remaining workers may find their own incomes reduced. Even renters who have jobs may find it tough to keep up with their rent.

Income Rates

Median household and per capita income level is a helpful tool to help you find the areas where the renters you want are located. Improving salaries also inform you that rental prices can be increased throughout the life of the asset.

Number of New Jobs Created

An expanding job market translates into a steady flow of renters. The workers who are hired for the new jobs will be looking for a residence. This enables you to purchase more rental properties and fill current empty units.

School Ratings

The quality of school districts has an important influence on property market worth throughout the city. Companies that are considering relocating prefer superior schools for their workers. Reliable renters are a consequence of a robust job market. Homebuyers who come to the community have a positive effect on property prices. You can’t run into a vibrantly growing residential real estate market without reputable schools.

Property Appreciation Rates

Real estate appreciation rates are an integral component of your long-term investment strategy. You need to be assured that your property assets will appreciate in market price until you need to dispose of them. Substandard or decreasing property worth in a community under consideration is not acceptable.

Residential units where renters stay in furnished accommodations for less than a month are called short-term rentals. The per-night rental rates are typically higher in short-term rentals than in long-term rental properties. These houses may necessitate more periodic repairs and tidying.

Short-term rentals are used by corporate travelers who are in town for several days, those who are moving and need temporary housing, and excursionists. Ordinary real estate owners can rent their homes on a short-term basis via portals like AirBnB and VRBO. Short-term rentals are considered a smart method to get started on investing in real estate.

Destination rental unit owners require interacting directly with the tenants to a greater degree than the owners of yearly leased units. Because of this, landlords handle problems regularly. Think about managing your liability with the help of one of the good real estate attorneys in Scott County IL.

Factors to Consider

Short-Term Rental Income

You should find the amount of rental revenue you’re looking for according to your investment calculations. A quick look at an area’s current average short-term rental prices will show you if that is an ideal community for you.

Median Property Prices

Thoroughly compute the budget that you can afford to pay for new real estate. The median values of real estate will tell you if you can afford to participate in that city. You can tailor your real estate hunt by estimating median prices in the community’s sub-markets.

Price Per Square Foot

Price per square foot may be inaccurate if you are looking at different buildings. If you are examining similar types of property, like condominiums or separate single-family homes, the price per square foot is more reliable. It may be a quick way to compare multiple communities or buildings.

Short-Term Rental Occupancy Rate

A quick check on the location’s short-term rental occupancy levels will show you whether there is a need in the site for additional short-term rental properties. A city that demands new rental housing will have a high occupancy rate. If landlords in the community are having issues filling their existing properties, you will have trouble filling yours.

Short-Term Rental Cash-on-Cash Return

A short-term rental’s cash-on-cash return will tell you if the venture is a practical use of your cash. Take your expected Net Operating Income (NOI) and divide it by your investment cash budget. The percentage you get is your cash-on-cash return. When a venture is high-paying enough to repay the investment budget fast, you’ll receive a high percentage. When you get financing for a fraction of the investment amount and use less of your own money, you will receive a higher cash-on-cash return.

Average Short-Term Rental Capitalization (Cap) Rates

Average short-term rental capitalization (cap) levels are widely utilized by real property investors to evaluate the worth of rental units. As a general rule, the less an investment property will cost (or is worth), the higher the cap rate will be. When cap rates are low, you can prepare to spend more for rental units in that market. You can obtain the cap rate for potential investment property by dividing the Net Operating Income (NOI) by the Fair Market Value or purchase price of the property. The result is the annual return in a percentage.

Local Attractions

Major public events and entertainment attractions will entice visitors who will look for short-term rental houses. If a community has places that annually hold interesting events, like sports arenas, universities or colleges, entertainment halls, and adventure parks, it can invite visitors from out of town on a recurring basis. At particular periods, areas with outdoor activities in mountainous areas, oceanside locations, or near rivers and lakes will attract lots of tourists who want short-term housing.

To fix and flip a residential property, you need to pay less than market value, handle any necessary repairs and upgrades, then liquidate the asset for full market worth. To get profit, the flipper needs to pay less than the market worth for the property and determine the amount it will take to fix it.

You also need to understand the resale market where the house is positioned. You always need to investigate the amount of time it takes for listings to sell, which is determined by the Days on Market (DOM) information. Liquidating the home immediately will help keep your costs low and maximize your revenue.

Assist compelled real property owners in locating your business by listing your services in our directory of Scott County cash property buyers and the best Scott County real estate investment companies.

In addition, hunt for top property bird dogs in Scott County IL. Experts in our directory concentrate on securing distressed property investments while they are still under the radar.

Factors to Consider

Median Home Price

Median property value data is a key gauge for assessing a potential investment region. Lower median home values are an indicator that there should be an inventory of residential properties that can be purchased for lower than market worth. This is a principal ingredient of a fix and flip market.

If your investigation shows a sharp weakening in real property market worth, it may be a signal that you will discover real estate that fits the short sale requirements. Real estate investors who work with short sale negotiators in Scott County IL receive regular notifications about potential investment real estate. Learn more concerning this type of investment by reading our guide How to Buy a Short Sale Home.

Property Appreciation Rate

Dynamics relates to the path that median home prices are taking. You need a city where real estate values are regularly and consistently moving up. Volatile price shifts aren’t desirable, even if it is a significant and sudden increase. Purchasing at the wrong point in an unstable environment can be disastrous.

Average Renovation Costs

A thorough analysis of the area’s building expenses will make a huge influence on your location selection. The time it requires for acquiring permits and the local government’s requirements for a permit application will also impact your decision. You need to be aware if you will have to hire other experts, such as architects or engineers, so you can be ready for those spendings.

Population Growth

Population growth is a solid indication of the reliability or weakness of the city’s housing market. Flat or declining population growth is a sign of a sluggish environment with not an adequate supply of purchasers to justify your investment.

Median Population Age

The median population age is an indicator that you may not have considered. If the median age is equal to the one of the regular worker, it is a positive sign. People in the local workforce are the most steady home buyers. The goals of retirees will probably not be included your investment venture strategy.

Unemployment Rate

While evaluating a region for real estate investment, search for low unemployment rates. The unemployment rate in a potential investment region should be less than the nation’s average. When the region’s unemployment rate is less than the state average, that’s a sign of a strong investing environment. If they want to purchase your improved homes, your prospective clients need to work, and their customers as well.

Income Rates

Median household and per capita income numbers tell you if you can get enough home purchasers in that market for your residential properties. When people acquire a home, they typically need to get a loan for the home purchase. Homebuyers’ eligibility to get approval for a loan rests on the size of their wages. You can see from the region’s median income if a good supply of individuals in the city can afford to purchase your homes. You also want to have wages that are improving continually. When you need to raise the asking price of your residential properties, you have to be certain that your home purchasers’ wages are also increasing.

Number of New Jobs Created

Finding out how many jobs are created per year in the community can add to your assurance in a city’s real estate market. A higher number of citizens acquire homes when their region’s financial market is creating jobs. Additional jobs also attract wage earners moving to the location from another district, which also reinforces the local market.

Hard Money Loan Rates

Investors who work with upgraded real estate often use hard money funding in place of traditional funding. This enables them to quickly buy undervalued assets. Research Scott County hard money lending companies and compare lenders’ fees.

If you are inexperienced with this financing type, learn more by using our informative blog post — What Is a Hard Money Loan in Real Estate?.

In real estate wholesaling, you find a residential property that real estate investors would count as a good deal and sign a purchase contract to buy the property. An investor then “buys” the purchase contract from you. The property is bought by the real estate investor, not the real estate wholesaler. The wholesaler does not sell the property itself — they just sell the purchase and sale agreement.

The wholesaling mode of investing involves the engagement of a title insurance firm that grasps wholesale transactions and is savvy about and involved in double close deals. Look for title services for wholesale investors in Scott County IL in our directory.

Our complete guide to wholesaling can be found here: Property Wholesaling Explained. When you opt for wholesaling, add your investment company on our list of the best wholesale property investors in Scott County IL. That way your prospective clientele will see you and contact you.

Factors to Consider

Median Home Prices

Median home prices in the city under review will quickly inform you if your real estate investors’ preferred properties are positioned there. A market that has a good pool of the marked-down investment properties that your clients want will display a lower median home price.

Accelerated deterioration in real property market worth may result in a number of homes with no equity that appeal to short sale investors. Short sale wholesalers often reap benefits using this strategy. Nonetheless, be aware of the legal challenges. Learn more about wholesaling short sale properties with our complete explanation. Once you determine to give it a try, make sure you employ one of short sale attorneys in Scott County IL and foreclosure law offices in Scott County IL to confer with.

Property Appreciation Rate

Median home price trends are also critical. Real estate investors who need to liquidate their investment properties later, like long-term rental landlords, need a location where residential property market values are going up. Both long- and short-term real estate investors will avoid a location where residential market values are depreciating.

Population Growth

Population growth numbers are crucial for your intended purchase contract buyers. If they know the population is growing, they will conclude that more housing units are required. There are more individuals who lease and plenty of customers who purchase real estate. If a population isn’t growing, it doesn’t need more houses and investors will look in other areas.

Median Population Age

A strong housing market necessitates residents who are initially renting, then shifting into homebuyers, and then buying up in the residential market. To allow this to happen, there needs to be a dependable workforce of prospective tenants and homeowners. That’s why the location’s median age needs to be the age of skilled workers in the workplace.

Income Rates

The median household and per capita income will be growing in an active residential market that investors prefer to participate in. Increases in rent and asking prices must be backed up by improving wages in the market. Property investors stay out of locations with weak population wage growth indicators.

Unemployment Rate

Real estate investors whom you approach to purchase your contracts will regard unemployment statistics to be a key piece of insight. High unemployment rate forces a lot of tenants to delay rental payments or default completely. Long-term real estate investors won’t take real estate in an area like this. Renters can’t move up to ownership and existing owners cannot sell their property and shift up to a bigger house. This is a problem for short-term investors buying wholesalers’ contracts to repair and resell a home.

Number of New Jobs Created

Knowing how often additional employment opportunities are created in the community can help you determine if the property is located in a reliable housing market. Individuals settle in a community that has new jobs and they need a place to reside. Long-term investors, such as landlords, and short-term investors such as flippers, are drawn to locations with strong job production rates.

Average Renovation Costs

An influential consideration for your client investors, particularly house flippers, are rehab costs in the city. Short-term investors, like fix and flippers, don’t earn anything if the purchase price and the renovation costs total to more than the After Repair Value (ARV) of the home. Give preference to lower average renovation costs.

This strategy includes obtaining debt (mortgage note) from a mortgage holder for less than the balance owed. The debtor makes subsequent mortgage payments to the investor who is now their current mortgage lender.

When a loan is being repaid on time, it is thought of as a performing note. Performing notes bring stable revenue for you. Non-performing mortgage notes can be re-negotiated or you could pick up the collateral for less than face value via foreclosure.

Someday, you might have many mortgage notes and have a hard time finding additional time to manage them on your own. In this event, you might hire one of home loan servicers in Scott County IL that will basically convert your investment into passive cash flow.

Should you decide to adopt this strategy, add your project to our directory of promissory note buyers in Scott County IL. This will make your business more visible to lenders offering profitable opportunities to note buyers like you.

Factors to consider

Foreclosure Rates

Low foreclosure rates are an indication that the area has investment possibilities for performing note purchasers. High rates could indicate opportunities for non-performing note investors, but they have to be cautious. But foreclosure rates that are high often signal an anemic real estate market where selling a foreclosed home may be a no easy task.

Foreclosure Laws

Investors should know their state’s regulations concerning foreclosure before investing in mortgage notes. They’ll know if their law dictates mortgage documents or Deeds of Trust. You may need to receive the court’s permission to foreclose on a mortgage note’s collateral. Lenders do not need the judge’s permission with a Deed of Trust.

Mortgage Interest Rates

The interest rate is indicated in the mortgage loan notes that are purchased by investors. That mortgage interest rate will significantly affect your profitability. Interest rates impact the plans of both kinds of mortgage note investors.

Conventional lenders price dissimilar interest rates in different parts of the US. Private loan rates can be slightly more than traditional interest rates because of the larger risk accepted by private mortgage lenders.

Mortgage note investors should always be aware of the up-to-date local interest rates, private and traditional, in possible investment markets.

Demographics

A successful mortgage note investment plan includes a review of the region by using demographic data. The neighborhood’s population growth, unemployment rate, employment market growth, pay levels, and even its median age contain usable data for you.
Note investors who like performing notes hunt for regions where a high percentage of younger people hold higher-income jobs.

The identical area may also be good for non-performing note investors and their exit plan. If non-performing note buyers need to foreclose, they will have to have a vibrant real estate market when they liquidate the collateral property.

Property Values

The greater the equity that a homebuyer has in their property, the more advantageous it is for you as the mortgage loan holder. When the investor has to foreclose on a mortgage loan without much equity, the foreclosure auction may not even cover the balance invested in the note. As loan payments lessen the amount owed, and the value of the property increases, the homeowner’s equity increases.

Property Taxes

Typically, mortgage lenders accept the house tax payments from the homeowner every month. By the time the property taxes are payable, there needs to be adequate payments being held to handle them. If loan payments aren’t being made, the mortgage lender will have to either pay the taxes themselves, or they become delinquent. When property taxes are past due, the government’s lien supersedes any other liens to the head of the line and is satisfied first.

Since property tax escrows are included with the mortgage payment, rising property taxes mean higher mortgage loan payments. Delinquent homeowners might not be able to keep up with rising payments and could stop paying altogether.

Real Estate Market Strength

Both performing and non-performing mortgage note investors can do well in an expanding real estate market. As foreclosure is an important component of mortgage note investment strategy, increasing real estate values are essential to finding a strong investment market.

A vibrant market can also be a potential community for creating mortgage notes. This is a desirable stream of income for experienced investors.

Some real estate investment firms are conceived as a trust called Real Estate Investment Trusts or REITs. This was initially done as a way to permit the ordinary investor to invest in real estate. Most investors today are capable of investing in a REIT.

Participants in these trusts are entirely passive investors. REITs manage investors’ risk with a diversified collection of properties. Shares in a REIT may be liquidated when it’s beneficial for the investor. Shareholders in a REIT aren’t able to recommend or choose real estate properties for investment. You are restricted to the REIT’s portfolio of properties for investment.

A Real Estate Investment Fund is a mutual fund that owns stocks of real estate companies. The investment assets are not held by the fund — they are held by the companies the fund invests in. Investment funds are considered a cost-effective way to incorporate real estate in your allotment of assets without avoidable risks. Investment funds aren’t obligated to distribute dividends like a REIT. Like any stock, investment funds’ values grow and fall with their share market value.

You can locate a real estate fund that focuses on a specific category of real estate company, like commercial, but you can’t select the fund’s investment real estate properties or locations. You have to count on the fund’s directors to select which markets and real estate properties are chosen for investment.