Why Markets Determine Profit

One of our staple markets for cash flow investing is Cincinnati, we like this market for two main reasons.

1. Cash Flow

2. Inventory

As you can see in this image, I did a search on Realtor.com.  The parameters for the search were 3 bedrooms or more and a price point between $5,000 and $60,000, which I feel is the sweet spot for maximizing cash flow.  We eliminated condo’s and town homes and focused on single family and multi family properties and 532 properties came up.   Cincinnati is a stable market with little appreciation, or devaluing.  What it is good for is long term buy and hold for cash flow, and fix and flip opportunities.

As I look up rent averages in Zilpy we find that a 3 bedroom house will rent for on average $895.00.  So if I can find a steady supply of properties under $60,000 with rent of $895 I have a lot of opportunity to find solid double digit returns.  This is one of the reasons that inventory is important to me.  With over 500 homes available, I can be particular about the neighborhood, and the condition of the property.

By researhing markets by inventory and cash flow I can quickly screen high profit market opportunities.  Once I have identified a market online, I then start to expand my research and check on the demographics, vacancy, long term outlook ect…  If the data then meets my criteria then I start to call local investors and property managers to confim my research.   Once a market passes all of the requirements we have the fun begins… Offers and Accepatnace…and CASH FLOW

New Homes Plunge…Good News for Me!

CNN just reported that sales of newly constructed homes plunged to the lowest level on record….going back to 1993.   The U.S. Census put out that Decembers sales pace was 44.8% below the same month last year.  If your a builder, or you invest in construction stocks, this is certainly alarming, however if your investor, lets dig a little deeper into the numbers.

• First inventories for homes on the market have been dropping now for 5 consecutive months.
• New homes are not selling because you can buy foreclosures for pennies on the dollar
• 5% Mortgage Rates
• The number of “Existing Homes” sold in December rose 6.5% from the previous month

So with inventories declining and low mortgage rates, investors are starting to dip their toes back into the market.  I see this as a positive indicator in an economy that continues to show weakness.   As a full-time Real Estate investor, I continue to look for value opportunity properties that I can hold for 3-7 years as we watch the market cycle around.