The Best U.S. Markets for Rental Properties

The rental market has been booming over the past several years, with many landlords earning returns of 10% or better.

While rising home prices have limited returns for landlords in some markets, other markets offer plenty of profits, according to RealtyTrac which analyzed rental market conditions in 370 major U.S. counties, including median home prices, average rents and unemployment rates.

For example, landlords in Anderson County, S.C., can rent a three-bedroom home with a median price of $70,000 for $900 a month. With average returns of 15.3% -- that's well above the national average of 10%.

Home to a university and several auto parts makers for BMW, Anderson is part of the Greeneville metro area and has a low 4.3% unemployment rate, meaning demand should continue to strengthen and help add to future profits.

Other areas that offer landlords more bang for their buck include Woodbury County, Iowa. Median home prices in the area, which includes the Sioux City metro area, were a low $84,250 while rents averaged $914 a month. That translates into a rental return of about 13% for landlords.

While low unemployment is one factor landlords should look for while assessing a market, RealtyTrac also suggested that investors take the demographics of an area into account as well, particularly when it comes to baby boomers and millennials.

Markets where these populations are growing rapidly should produce strong returns for investors going forward. For boomers, who were born between 1945 and 1964, retirement-friendly markets in Florida are predictably hot. Some local markets have seen their boomer populations grow by 20% or more since 2007.

The Tampa-St. Petersburg-Clearwater, Fla. metro area topped the list among markets for boomers.

Millennial markets, on the other hand, were scattered throughout the nation. RealtyTrac cited the Baltimore, Philadelphia, Jacksonville, Fla. and Atlanta metro areas as leading rental markets for this age group.
Several smaller markets are also good Millennial bets such as Fayetteville, N.C. and Virginia Beach/Newport News City, Va.

Understanding Short Sales

Short sales are purchases negotiated with the owner and lender(s) before foreclosure. Typically the purchase price negotiated is less than the balance owed on the property.  For investors, short sales present an opportunity to buy real estate below market value and help borrowers avoid foreclosure.

Short Sale Process

• Both parties consent to the short sale process, which allows them to avoid foreclosure, which involves more fees for the bank and foreclosure being reported on the borrowers credit report. However, this agreement does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.
• The bank or mortgage lender agrees to discount the loan balance because of an economic or financial hardship on the part of the borrower.
• The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender.

Short Sale vs Foreclosure

• Neither side is "doing the other a favor;" a short sale is simply the most economical solution to a problem.
• Banks will incur a smaller financial loss than would result from foreclosure or continued non-payment.
• Borrowers are able to limit damage to their credit history, and partially control the debt.
• A short sale is typically faster and less expensive than a foreclosure.
• It does not extinguish the remaining deficiency balance unless settlement is clearly indicated on the acceptance of offer.

For more information about short sales visit Carlisle Mitchell - Real Estate Tips for Investors

Your Objective Should Determine Your Strategy

"Of course, objectives are not the railroad timetable. They could be compared to the compass bearing by which a ship navigates. The compass bearing itself is firm, pointing in a straight line towards the desired port. But in actual navigation the ship will veer off its course for many miles to avoid a storm. She will slow down to a walk in a fog and heave altogether in a hurricane. She may even change destination in mid-ocean and set a new compass bearing toward a new port. Perhaps because war is broken out, perhaps only because her cargo has been sold in mid passage. Still, four fifths of all voyages end in the intended port at the originally scheduled time. Without a compass bearing, the ship would neither be able to find the port nor be able to estimate the time it will take to get there." ~Peter F. Drucker

All investors invest for some reason, with some objective in mind. Although objectives may change, they always exist.

As an investor it is important to stay focused, especially during times of market volatility. For best results your objective should determine your strategy.

For more information on investment objectives visit us online at Carlisle Mitchell - Real Estate Tips for Investors.

The Paydown Investment Objective

Paydown is when a mortgage borrower pays the principal and interest of a mortgage. In doing so, the borrower is paying down his or her debt.

Paydown also refers to an investment objective when a mortgage borrower pays the principal and interest of a mortgage from income received from a tenant. This is considered another source of income because it is money the borrower would otherwise have to pay.

Paying down the principal and interest increases the borrowers equity and can increase capital gains and income if sold or refinanced.

Investors who combine the paydown investment objective with other objectives and strategies can exponentially increase the return on their investment.

For more information about real estate investing visit us online at Carlisle Mitchell - Real Estate Tips for Investors

The 14 Best Places in the U.S. to Flip Properties

The 14 Best Places in the U.S. to Flip Properties
The best places for flipping properties are currently concentrated along the East Coast, but it's a popular practice across the country.

If you're interested in buying low and selling for significantly more than you paid, RealtyTrac came up with a list of locations with the best opportunities:

14. Middlesex County, N.J.

Average purchase price of flips: $200,015

Average sale price of flips: $264,742

Average ROI: 32.36%

13. Nassau County, N.Y.

Average purchase price of flips: $316,060

Average sale price of flips: $422,858

Average ROI: 33.79%

12. Monroe County, Fla.

Average purchase price of flips: $311,701

Average sale price of flips: $429,564

Average ROI: 37.81%

11. Berks County, Pa.

Average purchase price of flips: $117,846

Average sale price of flips: $162,774

Average ROI: 38.12%

10. Montgomery County, Md.

Average purchase price of flips: $347,682

Average sale price of flips: $482,969

Average ROI: 38.91%

9. Bergen County, N.J.

Average purchase price of flips: $320,010

Average sale price of flips: $450,492

Average ROI: 40.77%

8. Wright County, Minn.

Average purchase price of flips: $105,058

Average sale price of flips: $152,563

Average ROI: 45.22%

7. Anne Arundel County, Md.

Average purchase price of flips: $197,355

Average sale price of flips: $291,243

Average ROI: 47.57%

6. Saint Marys County, Md.

Average purchase price of flips: $180,411

Average sale price of flips: $268,254

Average ROI: 48.69%

5. New Castle County, Del.

Average purchase price of flips: $127,795

Average sale price of flips: $195,246

Average ROI: 52.78%

4. Campbell County, Ky.

Average purchase price of flips: $75,253

Average sale price of flips: $127,848

Average ROI: 69.89%

3. Baltimore County, Md.

Average purchase price of flips: $131,186

Average sale price of flips: $224,089

Average ROI: 70.82%

2. York County, Pa.

Average purchase price of flips: $88,063

Average sale price of flips: $151,871

Average ROI: 72.46%

1. Prince George's County, Md.

Average purchase price of flips: $125,011

Average sale price of flips: $229,275

Average ROI: 83.4%

U.S. Foreclosures Hit 8 Year Low

Foreclosure activity across the United States dropped to an eight-year low in May as banks reclaimed fewer homes and foreclosure starts saw their lowest levels in years, RealtyTrac said in a report on Tuesday.

RealtyTrac, which tracks and maintains housing market data, said 109,824 properties across the country were at some stage of the foreclosure process in May. That marked a 5 percent decline from April and left foreclosure activity -- foreclosure notices, scheduled auctions and bank repossessions -- 26 percent below the year-ago level.

Carlisle Mitchell - Houston - Judicial Foreclosures

Carlisle Mitchell - Houston - Judicial Foreclosures.
Judicial Foreclosure is a foreclosure proceedings in which a mortgage lacks the power of sale clause. In such an instance, many states require the foreclosure to be processed through the state's courts. If the court confirms that the debt is in default, an auction is held for the sale of the property in order to acquire funds to repay the lender.

This differs from non-judicial foreclosures, which are processed without court intervention.
Many states require judicial foreclosure to protect equity the debtor may have in the property. Judicial foreclosure also serves to prevent "strategic disclosures" by unscrupulous lenders.

In instances where the sale of the property through the auction does not generate enough funds to repay the mortgage lender, the former homeowner will still be held liable for the remaining balance.

Income Property

Income property is property bought or developed to earn income using various investment strategies. 

Income property can be residential or commercial. Residential income property is commonly referred to as "non-owner occupied". A mortgage for a "non-owner occupied" property may carry a higher interest rate than an "owner occupied" mortgage as it is viewed by lenders as a higher risk.

A common practice during periods of home price appreciation is for investors to purchase residential income properties with the intent that rents will cover their monthly expenses for a period of time until the property can be sold for a large capital gain. 

As with all markets during times of fast price appreciation, and as with all market bubbles, investors that enter the market first and get out first usually do well. Investors that enter the market later, and get out last usually don't do as well.

Multi-Family Investment Property

Multi-Family Investment Property is a type of home or building with multiple units owned by one or more parties. Condo buildings and duplexes can be considered multi-family residences; but with a duplex, both the property and the land are recorded on one deed. Whereas with a condo, the owners only own their individual units, not the common space or land, and each have their own deed.

Multi unit residential apartment buildings include multi family investment property of five or more residential units. This type of property can also be owner occupied (although not as common) or all units can be occupied by tenants.

Strategies for investing in multi family investment properties include buying properties at prices below market value and then leasing to tenants.

The investor can rent, refinance or sell for rental income, appreciation, capital gains and tax deductions, depending on the investors goals and objectives.

Short Sales

Short Sales
A home that is listed for sale at a price lower than the amount owed on the mortgage. Homeowners hope to sell their home as a short sale to avoid penalties associated with going into foreclosure. What can make it difficult to buy a short sale is that there are often two mortgages on the home and both lenders must approve the sale. The ownership of the mortgages on a short sale home usually belong to more than one party, so you'll likely have to convince multiple banks and lenders to take a loss on their original loan. This is why it often takes so long to approve a short sale offer. If the short sale fails and the homeowner can't afford to pay his mortgage, then the bank forecloses on the home.

Capitalization Rate (Cap Rate)

Capitalization Rate (Cap Rate)
A ratio used to estimate the return on investment of a real estate investment property, like an apartment building. It is calculated by dividing the income a property will generate in a given year (after fixed and variable costs) by the purchase price or current value of the property. For example, an apartment building that recently sold for $1,000,000 and generates $100,000 in income after expenses has a capitalization rate of 10%.

Houston's City Centre Is a Hit

HOUSTON - City Centre mixed used commercial development has quickly become a main attraction in Houston, Texas.

City Centre Continues to Drive Development in West Houston

HOUSTON - Just a few years ago Town and Country sat at the crossroads of Interstate 10 and the Sam Houston Tollway, major North-South and East-West corridors that could potentially funnel two million people to the site within 20 minutes, adjacent to one of the wealthiest ZIP codes in Texas.

What emerged in mid-2009 was CITY CENTRE, a distinctive mixed-use development that has drawn upscale retail shops and world-renowned restaurants, plus corporate tenants and discerning individual residents.

8-Ways to Make Money On Investment Properties

The key to building true wealth in real estate is through buying and holding. A good tenant can create wealth for you by paying for the mortgage, insurance, taxes and monthly fees through their rental payment to you. In addition, you have an asset leveraged for a fraction of the value.

For example, let's say you purchased a condo at $150,000 for $15,000 down payment. If it grows at 5 percent per year ($7,500 first year, etc.) you're making more than 50 percent on the money you invested -- which beats most traditional investments.

Real estate investing allows investors several ways to make and/or save money that other investment tools will never allow or have the ability to provide.


Successful investors don't just look at appreciation to make money. Here's how you can build wealth through your real estate investing:

1) Positive cash flow
This is simply what it sounds like -- the rent covers the mortgage, taxes, insurance, fees, etc., and once all that's paid, you have money left over at the end of the month. A wise investor will also have enough money in reserves to cover all these expenses for a few months in case the property goes vacant.

2) Pay down in principal
As the mortgage shrinks from the mortgage payments, your equity grows (and so does your net worth). This is one of the most powerful means of wealth growth -- using OPM (other people's money) to build your net worth. The tenant is providing the investor with hundreds or thousands of dollars per month to pay off debt, which turns into equity for the landlord.

3) Improvements
This is the fixer-upper that most people think about when investing in real estate. Purchase a property for $50,000, put in another $25,000, and voila, the house is now worth $125,000 ($50,000 more than the initial investment).

4) Wholesale purchases
The most effective way to build net worth and equity is to buy a house for a bargain price. These properties would be the pre-foreclosure, foreclosure, tax sales, etc., where the investor buys the property well below market price. In essence, you make your money when you buy the house at such a low rate.

5) Tax deductions
One of the greatest benefits about real estate investing is all the tax breaks allowed for these type investments. Uncle Sam allows many tax deductions, tax credits and other government-sponsored programs connected with real estate investing that cut the investor's tax bill, thus, increasing the bottom line and equity growth.

6) Asset Management
Many novice real estate investors lose money simply by not managing the asset wisely. For instance, painting properties before the wood is actually peeking through will keep the asset in good shape, seal the wood, and protect it from more expensive damage. Managing the asset is just as important as buying smart and cash flow. The real estate investment is a commodity, not a money machine, and must be managed and protected to maintain future growth potential.

7) Value appreciation
As your property increases in value, so does your wealth. This is the old fashioned principle of buy and wait. Buy at today's prices and with time, your asset will grow in value due to appreciation. In addition, your equity will grow along with the amortization principle mentioned above.

8) Rent appreciation
As the cost of living increases, so, too, should your rent cash flow. Increasing your rental income per month by 5 percent could result in hundreds of dollars of cash flow per year -- year after year.

Lease Options

Definition of 'Lease Option '
An agreement that gives a renter the choice to purchase a property during or at the end of the rental period. As long as the lease option period is in effect, the landlord/seller may not offer the property for sale to anyone else.

When the term expires, the renter must either exercise or forfeit the purchase option. A lease option gives a renter/potential buyer more flexibility than a lease-purchase agreement, which requires the renter to purchase the property at the end of the rental period.


Lease Option Explained
The property owner may charge the renter a premium for the option to purchase the property, perhaps in the form of higher (above market value) monthly rental payments. The property owner may opt to apply some of the higher rental fee toward the purchase price if the renter exercises the option.

Any premium will likely be forfeited if the option is not exercised. The term of the option may be any period on which the property owner/landlord and potential purchaser/renter agree, but is commonly one to three years. The lease-option property's purchase price may be determined either at the outset of the agreement or at its conclusion.

Margin of Safety - Value Investors #1 Rule of Investing

Margin of safety (safety margin) is the difference between the value of a property and its market price.

Application to investing
Using margin of safety, one should buy property when it is worth more than its price on the market. This is the central thesis of value investing philosophy which espouses preservation of capital as its first rule of investing.

The margin of safety protects the investor from both poor decisions and downturns in the market. Because fair value is difficult to accurately compute, the margin of safety gives the investor room for error.

A common interpretation of margin of safety is how far below market value one is paying for a property. For high demand property, value investors typically want to pay no more than 90 cents for a dollar (90% of market value) while more speculative property should be purchased for up to a 50 percent discount to market value (50 cents per dollar).

No Slowdown in Sight for Houston Housing Market

HOUSTON — Home buyers kept Houston-area REALTORS® hopping in February, generating a 15.5 percent increase in sales compared to the same month last year, according to the latest monthly data compiled by the Houston Association of REALTORS® (HAR). The buying spree held local housing inventory to the same level as January — 3.6 months — which is the lowest supply of homes on the market since December 1999.

February marked the 21st consecutive month of increased home sales, with average and median prices reaching the highest levels for a February in Houston.
Contracts closed on 4,407 single-family homes during the month. All housing segments saw gains except for those priced below $80,000. That suggests the likelihood of an exhausted supply of available homes at that price point. Homes selling from $250,000 to $500,000 registered the greatest sales volume increase, accounting for the price appreciation.


“The recent flurry of home buying and reduced inventory may seem unusual, but is exactly what the Houston market experienced back in the late 1990s,” said HAR Chairman Danny Frank with Prudential Anderson Properties. “The difference is that now we are seeing multiple offers and bidding wars. We are still in a seller’s market, and I would advise anyone who is considering selling their home to consult a REALTOR® who can price it right and handle all the details and paperwork, including sorting through whatever offers may come in.”

The single-family home average price increased 9.6 percent year-over-year to $220,445, the highest level for a February in Houston. The median price—the figure at which half of the homes sold for more and half sold for less—rose 7.9 percent to $161,700, also a record high for a February.

Foreclosure property sales reported in the HAR Multiple Listing Service (MLS) declined 23.4 percent compared to February 2012. Foreclosures currently make up 15.8 percent of all property sales, down from 19.6 percent one month earlier. The median price of foreclosures climbed 7.7 percent to $85,000.

February sales of all property types in Houston totaled 5,324, a 17.2 percent increase over the same month last year. Total dollar volume for properties sold rocketed 26.5 percent to $1.1 billion versus $887 million a year earlier.

February delivered positive results to Houston’s overall real estate market when all sales categories are compared to February 2012. On a year-over-year basis, total property sales, total dollar volume and average and median pricing were all up.