How to Present Your House as a Great Investment
that real estate investors will want to buy fast

Lets say you are selling your house. Of course you want to get the most you can. However, If you need to sell fast, here is what you should show investors. This is what investors will be look for when considering buying an house for investment. If you can present your house as an investment, you will likely get more attention from investors with big pockets.

First, make sure you research market rents in your area. You can use websites such as Zillow.com or forRent.com to see what. Probably the best way to determine market rents is to ask neighboors who are renters, how much they are renting for. Another good way to find out market rents is to ask a local realtor. You might need to say you want to rent your house, not sell it, to get this information. (realtors will sometimes givr you an inflated number so you list your house for rent with them.) A good way to determine what houses are renting for in your area is a combination of the methods.

Lets say that similar houses in your area are renting for $1800 / month. Now, annualized this figure by multiplying it by 12 months.

1800 x 12 = $21,600 Potential Rental Income

In other words, your house has the potential to bring an investor $21,600 per month.
This is great, howeverm investors want to account for vacancy, as its not realistic to assume the house will be rented 100% of the time. It is an industry standard to expect the investment to be vacant 10% of the time.

Calculate vacancy losses by multiplying the potential total income by 10% and substract it from the potential total income to arrive at what investors like to call the “Effective Rental Income”

Vacancy Loss (at 10%) 21600 * .10 = 2,160
Effective Rental Income: $21,600 – 2160 = $19,440

This means an investor can expect to loose 2160 a year due to vacancy. 2160 accounts for about a month and a half of vacancy, seems like an acceptanle timeframe for finding, and interviewing potential tenants to rent to.

Another way to calculate the effective rental income, is to simply multiply the Potential rental income times 90%.

$21,600 X .90 = $19,440

By accounting for some vacancy loss, the investor has a more realistic view of what the property can bring in.

So now that we’ve determined what your house can generate in a year, we need to calculate what expenses it generate too.

The main expenses an investor will look for include:

1. Property Taxes.
If your property taxes are paid as part of your mortgage payment, you might not remember what your property taxes are. You can find your property taxes in your yearly trim notice, by visiting the website of the property appraiser for your county, or by calling the office property appraiser. chek nreia.com to find the contact information for most property appraiser offices in the united states.

For this example, lets say you visit your county’s property appraise website and find out your house taxes are 3,000 per year.

Property Taxes = $3,000

2. Property Insurance

Any smart investor will want to have insurance on the property. Regardless if you have property insurance or not, you should find out what a insurance policy would cost in your area. Property insurance costs vary by the value of the house, insurance is more expensive if the property is located in areas with higer probability of disaster, Hurricanes and Earthquakes.

A good rule of thumb is to multiply the value of the house x .025, an even better way to determine this number is to call an insurance agent and ask for a quote. You can find the market value of your house by looking for what investors like to call “comps”. Comps is the industry lingo for “comparables”, and what it means is recent sales of “comparable” houses (similar number of bedrooms, bathrooms and living area or square footage). Good places to find comps is Zillow.com. Trulia.com . We’ve compiled a good list of the best websites to find comps and determine your house market value. Remember we are trying to sell fast and for cash, so we don’t care too much about market value at this point.

3. Management Costs

Although you might end up selling to a novice investor who does his/her own management. Professional investors do not manage their properties themselves. A typical property managemnt company charges 10% of rents collected. Property managers collect rents, and fix any issues, such as a broken toilet.

We determined the effective rental income for your house was $19,440. If we multiply this number by 10%, we arrive at the management fee, another expense the investor will likely incur.

Management cost: $19,440 * .10 = $1944

4. Repairs and Maintenance

An investor will want to set account for repairs and maintenance. This can include paint, appliance repairs, etc..

Now lets add all the expenses

1. Taxes: 3000
2. Insurance: 1000
3. Management: 1944
4. Repairs 1000
———————-
Total: 6944

An investor should expect

Net Operating Income:

Cap Rate:

Cash on Cash Return:

Debt Coverage Ration: