What Makes a Good Rental Property #027

my other ones? And how much did they cost? I want to know that, so you should know that all my glasses are from Zenny. Did you know that optical? Literally? Yeah, so is any optical. They're one of those cheap overseas players. And dude, I have I'm gonna guess eight or nine different pairs from them, and they're great. They're super cheap, which allows you to purchase two to three at a time, and you know, if it doesn't work out, it's like, well I only dropped twenty bucks on them, all right,

So twenty bucks a pair? Is that roughly what you're spending? Yeah? Yeah, it's been a couple of years. Maybe two or three years since I've ordered some. But yeah, typically you can get like the fancier coatings on there where it's like smudgeproof for different like UV. I don't know UV coading. I think all that's kind of bull crap anyway, So I love Zenny. I don't wear glasses because if you did, though, man, I think you would love Zenny. I totally go to

so cheap. Yeah, that's awesome. I've totally you know, dug around on the website before and stuff like that. By the way, not an ad Matt just has any glasses. And so if you want to check out any optical, like literally an awesome money saving strategy if you wear glasses is to shop at ennypple, so it's any optical Z E, N N I, and then Optical dot com.

So we'll put a link in the show notes. And then there's other actual, you know, similar companies online, like there's Goggles for you, and I've heard of them, I've never checked them out. I thought about hopping on there to check out one of their styles, see what they look like. But like the glasses you're wearing like legit,

like like like Warby Parker or something like that. But you're talking about a hundred dollar glasses, and if you're going to one of the traditional eyeglass shops, you're probably spending or if you're even going to Costco, which hundreds reasonable hundreds, you're dropping at least two hundred bucks minimum on glasses. And so yeah, you know, go go to your eye doctor, you know, get your prescription, and you get the pupillary distance. That's an important How do you

know all this? I know you don't even wear glasses, and you know you know about pupillary distance. I know all the numbers, of course, And so you gotta get all those things, plug plug them into a site like Zenny or goggles for you and just save joy, saving tons of money, tons of money on glasses and don't worry about it, because I think that's the biggest hang

up people have. They're like, what if they don't fit me and or maybe I won't like them, you know, and just order a few pairs and they've got the different kind of sizes on there, and you know, take the measurements and do all that and if one or two don't work out, that's fine. You still got a

new pair of glasses for sixty bucks. Assuming too of them to work out, you know, and you can I think, upload a picture of your face, right and yeah, yeah, you can do a virtual triogh Yeah, super funny because they I mean, they were doing this years ago, like seven years ago. Maybe it is when I got my first They've been around a long time at this point, and I remember the first time I did that. Nobody else had ever done something like that. I thought that

was the funniest thing. You're an observant, dude, commenting on my glasses. Saw the new glasses. I was wondering, what was up, dude. I wanted to mention too. I finally got my uh, speaking of photography, I finally got my business checking accounts set up, and I'm about to kick Wells Fargo to the curb. Finally, high five my friend because I don't know. They suck so bad. We talk about this that they're essentially the devil. Really, yeah, Wells

Fargo is the worst. So if you are banking with Wells Fargo right now, please please do yourself a favor and leave them. I have we have an article on our site about you know, how to switch banks and which banks you should consider switching to. But like dude, thank you, way to go, thank for leaving Wells Fargo.

Like that's just a good American thing to do. Congratulations, it's the middle of the summer now, you know, there's nothing more American than kicking a giant conglomerate bank to the curve when they have treated people very poorly, literally committed crimes and and still no one goes to jail and there and their executives and CEOs get huge bonuses batty bonuses, thirty fifty seventy millions. What do you think

about their new ads? Have you seen them? With the World Cup being on, They're like, we've been around since whatever year, but rebirth or renewed, you know, basically, I feel like it's just the lame way of like admitting that they screwed up. It feels very disingenuous because it feels like it's just branding, you know, right, Like it's a good it's a good way to brain yourself. I always but most people don't even know, aren't paying attention,

I don't think. But the amount of stories that came out over the last what year and a half, of all the things that Wells Fargo has done to the American people. Uh, it are astounding, and you know, creating fake accounts and people's names just to hit the like the branch quotas manager is pressuring teller is basically to make it happen no matter what. Essentially, it's like, all right, well, when you put that kind of pressure on your on your on your employees, what do you what do you

expect that they're gonna do? You know, if they're going to get fired for not hitting a certain number of new accounts opened within a period. So terrible culture to work in, and what they did to you know, so many of their own customers and um human people who weren't their customers that they were signing up for accounts.

It's pretty awful stuff. If you just go to Google and type in Wells Fargo and then hit the news button and then just scroll through like the last year and a half, you'll you'll be amazed at all the terrible things they've done and how everyone's gotten away scot free man in the whole process. So I feel like we've said their name enough. Let me I do want to say who I'm switching to. It almost sounds funny to say because they don't sound like a real bank.

But but there let me the best online free business checking account, did I say everything? Yeah? So their online they're not based in the location. It's for business, which is tough. For years, I've been looking for a great free online busines this checking account. Business accounts are the hardest one. It's so hard as a personal, as a human, as a single individual, but it's really hard as always a business to get a good free checking account. Yeah.

Only recently have the business checking accounts kind of come on board specifically with what I'm looking for to which is not maintaining a balance. And that's one of the things I hate about my my wealth Fargo. And it's a grandfather to account, so I've got perks. So they've probably gotten like a lot worse. Yeah. Yeah, And so I don't know what what what the requirements are, but

I know that they're worse. It's the only reason I've held onto that account because I try to sort of reorganize my accounts, and I realized it was gonna I was gonna have to increase the amounts either that I spent every month out of that account, or I was gonna have to maintain a higher balance. So I'm looking forward to only having to keep zero dollars in my Bank of the Internets, which is their name by the way, I don't know if I have I not said their

name yet, Bank of the Internet. No you haven't, so that it's yeah, Bank of Internet. I think the actual name maybe Bank of the Internet. And that's amazing. You've read like you d C insurance that all that completely. It's it's b of I is there is like their shorthand Bank of Internet, be of Viye, But they're the one I'm on though now is the basic business checking account.

And for them you do have to make a one thousand dollar initial deposit, but then after that you can just pull it out and then you're sitting there with a zero balance and I can use them to make my my business deposits remotely with my phone. And their limits are way higher than any big name bank like Chase or Wells Fargo. And their daily limits are higher, their monthly limits limits are higher, a much higher dollar amount than I mean, let's be honest that I'm ever

gonna pull in. Yeah, it's They're like, oh the limits are I mean there's something like fifty a month. I'm like, okay, that's not gonna be a problem for me, trust me, dude. I know you've been kind of on that this hunt for a long time, so I'm glad you've just been busy. Man, it just takes some time to finally sit down. Yeah, I'm glad you found something that you know works on

all those levels for you. And you know, we'll we'll put a link because I know there's a lot of small business owners that listen to this podcast and they probably are paying, you know, monthly fees every month for having a checking account or their limits or there's all these hoops have to jump through and it's just a huge pain having to do twelve transactions a month in

order to keep it free. They accidentally click a view image, view, check image, deposit and then they get charged three fifty if you're listening, yes, yes, well as firego man, they do it, dude, that's the dirtiest thing I've ever heard of. I'm not even kidding. When you go and you log into your account, it's got your transaction summary and it'll say deposit and I'll have a little link and it

says view image. And remember the first couple of times I did that because I like to see I just make sure, like, is that the one with that that I think I think it was because sometimes the amounts for the same and yeah, I was getting hit with these charges. Man. It wasn't until maybe a year later that they put a disclaimer kind of next to it explaining that that's what that was for the year before that though, when I was figuring it out myself, I

mean I called them up. They said, oh, that's because you clicked view image, which freaking costs them nothing. Yeah that's crazy, that's crazy. That's so that I think to takeaways from the to takeaways if you are if you're a business owner, you should totally look into Bank of Internet.

And we'll put a link on our show notes. Yeah you love to create, like write a post or something, but at the very least we'll have a link up there directly to them, because I mean, they're not advertising with us that it's just they're just a great, great service that they're putting out there, great resource for small business owners. And then if you do your banking with Wells Fargo in any way, former fashion and I probably have police stop and you know, I don't think you know,

we're not usually here to bash companies. That's not usually what we're about. But I feel okay to doing that about right I. It feels cathartic. Actually, I think to to talk about how terrible they've been and uh and and if you do your business like things like that, we get our money taken from us as as consumers, as individuals because we don't fight back and because we don't move when a company takes advantage of us like that. And the competition in this country is so stiff, especially

in the area of banking. There's so many good banks out there offering such great services. That for you to stay with the company that hates you, that doesn't care about you, and then it's going to charge you exorbitant fees for ridiculous things like clicking to see an image of your check, then insane. We're doing it to ourselves. And so leave a company like that, immediately go to another bank as quick as you can, you know, hustle up and uh. And it's good for our country, it's

good for you. I mean, we should just not be supporting companies like this to treat their customers in this way. Yeah, I feel bad for even having waited this long, you know, I feel like I've I've I've been on the wrong side of history. Uh, but like waiting and not taking steps to kind of further go down that path. And you know what, last thing about the big banks, they continue to pay point zero one, all of them on your savings. So lame it? Need we say more? Yeah,

all right, onto the beer for this evening. Um. Our friends Michelle and Jen just got back from Iceland. They actually went to a few countries and I was one of them, did a little tour. Apparently it's the land where there's a waterfall around every corner, which sounds awesome.

Definitely want to go to Iceland at some point. Oh and the flights are actually really cheap to Iceland, Yes, in the wreck of vic Yeah, because Iceland Air flies there from like some of the Northeastern cities, and so if you want to get to Iceland, you can actually do it pretty reasonably if you fly out of the Northeastern corridor. So is Iceland still like the hit of city to the flant I think Iceland is the place to go, man. Like, I've got tons of photographer friends

and everybody always post pictures from from Iceland. It's like the cool place to take a picture of horses and waterfalls. Waterfall like a black church like on the hillside. Yep, yep, that's it. That's it. That's Iceland. So we have an Icelandic stout from a brewery called Borg. Let's pop it. You sure that's how you say it? We we botch any other European uh name or phrase. I'm sure that I'm not sure that that's how it said Borg. So

do you know anything about this actual? I don't. My friend Michelle texted me from Iceland and said, hey, we wanna get you a beer. Do you know what Icelandic breweries are good? And I didn't off the top of my head. So I went to the trust the old Internet. One of my favorite websites for looking up what beers are good, what breweries are good in a place, Beer

advocate dot com. It's a great site. Like when I'm going to a city or to a country, I always go to be your advocate just to kind of see, you know, what people rate these breweries and the beers, and then I kind of know, you know, where my priorities lie for where I want to go drink. And so I looked him up and always a good way to play your travels. Yeah, yeah, and borg was was pretty well rated, and so Michelle and Jen were kind

enough to bring back this Icelandic stout from them. And again, I don't know how to pronounce it, so I'll just say Icelandic stout. Not surprisingly, this poor is a nice, crazy dark color, not able to see through at all, nice brown head. It smells like a stout, which is actually kind of refreshing, just you know, like I feel like lately the stops we've had are bigger in their barrel age, and so it's kind of nothing but like

barrel and bourbon and oak and wood. It smells like bourbon or some of the adjuncts that they put in it, like coffee or manilla or something that smells like classic stout smell, no doubt, no doubt. It's really clean. It's like a really clean stout. Yeah, that's actually funny that we kind of mentioning that. And then it's, uh, it's got this kind of nice boozy edge to it, like because and it is eleven and a half percent alcohol, so it's a you know, it's a bigger beer man.

It tastes like a classic, delicious, bigger stout. I like it. So how far we get through this podcast? I want to run this morning, and I don't think I've rehydrated since then, so I'm just gonna just drink this real fast for you might want to sip because we have a lot of information to get to. That's right, man,

we do. But first let's take a quick break. Let's get onto the topic in hand, what makes a good rental property, And ultimately we're assuming that you want to be a landlord, and that you don't want to be a landlord just for a few years, that you are kind of in this forward of the long term, because

very few properties make good rental properties. If you're only planning to be a landlord for a couple of years, you should really realistically be looking at a longer time horizon and also be looking at a bigger percentage to

put down. We'll get into kind of the specifics of what what we think makes up a good rental property, but no going into it that if you're not in it for the long haul, and you don't have twenty or likely to put down on a property that you're buying as an investment, probably a lot of this advice you know doesn't apply to you. Yeah, Jo, that's right. And we're also gonna be talking specifically about what makes a property good, right, so like we're talking about specific houses,

specific homes. We've done a previous episode about investment properties, and we kind of covered more of the general basics where we talked about everything from your personal flanances way more than just how much to put down, but all the way from if you know, should I be handy all the way through to the different things you want to consider if you are looking at investment properties. Go back and listen to that one that is episode four.

You know we're gonna come back to real estate again though, dude, because we just we love it so much and there's just so much you can talk about with when it comes to it. So yeah, I was gonna say that too. I mean, I think there is a lot for us to discuss, and there are a lot of episodes that over you know, the next coming months that we will create about investment properties because for you and I, there's such an integral part of kind of our ultimate path,

the financial independence. There's something that we enjoy, we see a lot of benefits from and you know, for the long haul, I think real estate is if you're smart about it, if you're buying well, if you're holding for the long term. Uh, it's just as good, if not probably even better in a lot of ways than investing in, uh the stock market over the long term. So I

mean we believe that, right. That's that's why it's such a huge part of our personal finances and uh and yeah, like you said, O, our path to sort of financial independence and in the long term. That's why we want to do this is because we want to be landlords. Like we both sort of see ourselves long term being landlords and this being something that we can kind of continue to do in our ripe old age as we

continue to drink beer. So that's why for us, it's important for us to get a good deal on a property. We're not in this to just collect homes. I think sometimes people think they're like, oh, I would love to have a home up in so and so city, or you know, like even on the beach or and things like that. And that's fine if you want to have that for personal reasons, uh, you know, or to also kind of parlay that into a beach house or or

something else like that. But if you're looking at it from the standpoint of generating income and to have that become more and more how you are able to feed yourself. You know, like if that's how you put food on the table, That's what I'm going for, is to be able to put food on the table that way and in the you know, ultimately I would love to be able to do real estate full time. And so because of that, we want to find a good deal because obviously the better dealer that we can get, the sooner

we can get to that point. Yeah, So that's definitely one of the main keys in you know what makes a good rental property finding that deal, and you know when you've spotted a deal because you have been studying the market in your area. So just like grocery shopping, like I know when a bag of spinach is a good price at aldi because I've been to Kroger and I've been to publics and I know that, you know what, for a bag of spinach at all the is pretty

dang good. And so in the same way, you want to be that familiar with the real estate market in your area, and what that means really for you is to specialize in a specific part of town or two or three. You want to know the streets in that

area well enough to to know when a deal hits. Yeah, if when you see an address pop up and like your MLS listening for that morning, Like there should be certain street names that like jump out to you when you when you see a name, you're like, oh, let me let me click on that one to check it out because you know that street and that should sort of trigger something for you. Once you've gotten to that stay age, you're you're well on your way to becoming

a real estate nerd. And so yeah, the beginning to finding a deal is essentially you know, studying Zillo Redfin, you know the FMLS, having an an agent that that feeds you properties every day, Right, you're getting stuff into your inbox, studying those leads for months essentially. Yeah, I

mean even a year. Man, There's been times when I've been like really trying to get to know neighborhood, and every morning when I check my email, that's the first one I go to just a real quick make sure that there's nothing that popped up that was a really good deal, because like you said, yeah, you've been watching it and you just need to be that familiar with it. Certainly,

that's the way we approach it. I think a lot of folks take it to a whole another level when they're buying even out of uh state or you know, like not locally to them, or sometimes folks are buying wholesale. We're not talking about that because that's not what we

do personally. It takes a lot more money to kind of go down those paths, and we are definitely not at that point yet maybe someday, but we we kind of do it like Mama Pop style, you know, like what we know everything that goes on within our sort of portfolio of real estate. We're familiar with our parts of town and specifically what you know. We we know our city real well. Yeah, and we I think we like to keep it simple. You know, there are a lot of people that that like to grow big, grow fast,

you know, a massive, big portfolio whatever. You know, we're kind of the mindset, you know, both of us that slow and steady wins the race. You know, smart solid investments, you know, with solid underlying financials, like we talked about an episode four. Then when we're buying, you know, we're making a long term investment, but we also we're using our own money that we save over time to put

down on these homes. Super simple. There's nothing fancy about that, you know, Like folks are like, how do you do that? It's just like, well, just try to be frugal, save out that money once you get enough money. It's old school, right, there's nothing really like special about it. And there's all these you know, real estate conferences and seminars and hotel ballrooms like they'll they'll tell you here's how you get

rich in real estate. Here's how you buy real estate with none of your own money, and you use somebody else's money to finance these deals. And I'm not gonna say that hasn't worked out for anybody. I'm sure you know at least two people speaking at those conferences have gotten rich off of your fees to end or but they're really good at writing books. Yeah right, but yeah,

like we're the of the old school mentality. If how you should approach and buy rental properties, and that's with your own money saved up over time, going slowly but surely, knowing your market and finding that deal and on that note, to buy that underpriced property that we're talking about. You'll also need to, once you know your market, be ready to move quickly because when a deal hits, you're not

the only one seeing that. There are other people out there, you know, that are looking for a deal as well in real estate, and so when something hits, you need to be ready to pounce. You need to have your finances ready, You need to have your relationship with a lender if you need one, if you're not paying all cash established, you need to have an agent that's ready to write and offer day of when you see that

deal hit the market. And so yeah, you're just gonna want to be ready to pounce when the deal actually hits the market. And that's someone in these days with

the market being as hot as it is. Man, if you're able to jump on a deal like that, and you know, hopefully even trust snaggett sometimes if you can get it before it makes it to the weekend, then I mean then that's like really good, right, because once you get like right through the weekend and everyone's had a chance to come to the internet and see what's out there, well, they're gonna have like highest and best offer by like next Saturday, and you know they're gonna

end up paying twenty thousand more or somebody's gonna end up paying twenty thousand more than maybe what you could have gotten it for. Yeah, man. And so a good way to know if you are getting a deal when it comes to specifically an investment property is the one percent rule. And we talked a little bit about that on the Investment Property Basics episode that episode four that we mentioned earlier. One percent rule states that you should be able to get one percent of the purchase price

of the home in monthly rent. And you know, it is a real sort of quick math, like not even back on the napkin, because you don't need to write it down. It's just it's just like taking the price and moving to this that's one plays two places, and think could I get this amount and rent for this house every month? And that's just a good way. It's

sort of a good rule of thumb. I'm actually curious to hear your thoughstral On, if you think that this still sort of holds in today's market, because specific to Atlanta, the market is so stink and hot right now that I mean, on my most recent purchase, which was last year, I wasn't quite to one percent. You know, it was.

It wasn't quite the one percent rule, and I knew that going into it, but uh yeah, even still, you know, I felt that it was still going to be a good deal, uh and I was still gonna be able to to make a good return on that. Here's my quick thought on that. I think of these areas that we're gonna talk about as kind of like weights, and if one area is weighted more heavily, I'm okay with the other area being a little bit lighter. Right. And so let's say a property doesn't meet the one percent rule,

I don't write it off immediately. I think it's almost we should probably call it the one percent rule of thumb because if I buy a property that is a hundred twenty dollars, but I can only get a thousand dollars a month in rent, well, I still don't write that property off just because it doesn't meet the one percent rule, because what about potential ciation or you know where that property is headed and the neighborhood, and you know the infrastructure, the changes that are happening, uh, the

potential growth in that city or or particular part of town. I mean, I think there are a lot of questions to ask, and so uh that the one percent rule of thumb is a really good one. It's just great way to kind of coal favorites and eliminate loser properties. But it is also it is not this and all be all, because you know, the last property I bought was you know, similar to what I just said. It was actually a hundred fifteen thousand dollar property. I'm currently

getting a rent amount of a thousand dollars. But I'm almost positive I can meet the one percent rule next time around when I least to somebody else. And on top of that, I feel like the appreciation potential for this particular property is really really good. And so you know weighted averages, right, I'm taking these things and I'm saying, well, if I bought this other property, you know, and a lot of real estate investors invest specifically for cash flow.

That's what people want, you know, they want to make money every month, and I that's fine, that's a that's a fine way to invest as well. It usually depends on where you're investing kind of what you're gonna pay a little more attention to. And but here where I'm investing, I'm paying attention to the cash flow. But even more so, I'm really thinking about the potential of a neighborhood and

the potential of that property to appreciate over time. That actually, for me is a bigger influencer when I'm looking at a property than just meeting one percent rule of thumb. Yeah, even though I think it's a really good rule of thumb to use. Yeah, I mean said, I mean cash

flow is still important. Like when you say that you don't wait cash flow as much, like you're still talking about like a couple hundred at least in positive cash flow a month, right, Yeah, I think probably the worst thing that I've ever I can never hear out of an investor real estate investor's mouth, is you know what, and it's covering the mortgage. The rent is covering mortgage. Right,

That's that's a terrible thing to say. That's a terrible way to look at it, because you can put that money in an online bank account, and you know what, the online bank is not calling you about a broken toilet or a leaky a leaky roof. And so I'd rather if I my money wasn't going to make almost anything, I'd rather just have it in savings and not be dealing with the headaches of humans and fixing things. So it's definitely not the way you want to look at it.

But back to the one percent rule real quick, I wanted to talk about it actually doesn't always just include the purchase price. Because let's say you're buying a house that is a complete dump, it needs a major renovation, and you are buying that house for thirty dollars, but you have to put seventy dollars into it. Well, you know what your hope is that at the end of those renovations of making that house livable, that you're able to then get a thousand dollars a month for rent.

So essentially, what you're looking at, if you're boiling this one percent rule down, it is purchase price and immediate repairs and improvements that you need to make in order to get that house rentally or deferred maintenance. Sometimes it's college just like the things that you know you needed to basically dump into the property in order to kind of get it up to speed certainly where you're not kind of over improving it for the neighborhood or the market.

But yeah, you definitely want to take that amount into the sort it's total costs there as well. And I think if you're not in the ballpark on one percent, you know, that's a great just ballpark estimate thing to think to look at as you're you know, looking at you know, fifty sixty properties a day as you're doing your research. It's just this awesome way to say, you know what, I'm keeping these five to do a little more digging, a little more research on to see if

they meet the rest of my criteria. Yes, r O I man, so your turn on investment is for me a great way to kind of dig in beyond the one percent rule, uh, to figure out if, if if a property is going to be even better, since the one percent rule can just kind of be almost too broad. So let's say, for example, you get a hundred fifty house, right, and so the one percent rule a rule of thumb says that your monthly rent should be fi a month. Right, It's easy math ye, And you think, okay, I can

I can definitely do that. If so, great, maybe you should jump on that property. But if you're short, you might think, oh, maybe maybe this isn't a good property. But if you're doing one percent rule on that with a typical down with today's rate, you're looking at an r o I that is easily over and that's huge. I mean, if you're looking at something that's closer that you're earning on your money. You can't make that in

the stock market. And obviously a property takes a little too, maybe a lot more work, depending on if it needs additional improvements or anything like that. But all that to say, if it falls short or the one percent rule, we're saying that you could still potentially be earning a lot of money. But then, on the other hand, if you'd be happy with returns even less than that, right, so say you'd be happy with returns closer to say, which

is still outperforming the market. And that means on that same house that you paid a hundred fifty four, you could rent that out instead for fifty a month, and that's more like you know, if you do the math on that, that's closer to like the point eight percent or the like point a five percent rule rather than

like the one percent rule. What I say is all that to kind of help put it in context, is that you might see that a property may not completely perform at the one percent you know rule level, But if you run the numbers a little deeper and see and take the mortgage and just all the other repairs and maintenance costs and insurance and all that into account. All that included, you might find that you would still be making a ton more than you would if that

money was just passively invested in the market. Yeah. So for me, one percent rules is helpful, but our o I it's just a much richer way to really kind of dig in and sort of compare should I take this money and invested in real estate or should I just dump it into the stock market? Yeah, Matt, So that one percent rule, right, is a great way to kind of initially check and then rule things out and

decide what you want to look at more deeply. And then the r o I is a great way to kind of assess in a little bit more detail the particular property. And on top of that, you want to find properties and separate them by condition, neighborhood, risk, and potential appreciation. So how much work is this house going to take? Now? How much work is this house going to take over the next few years? Does it have a roof that needs to be replaced or an aging

HVAC system? Those are the kind of items that could separate a potential a winner from one that you decided to discard into the I don't want to buy pile. And then neighborhood risk. So what does that neighborhood profile look like? And is it a neighborhood on the rise or is it a neighborhood that has been in decline

for a few years. It's better to be buying in a place where you are going to have tenants vying for your property, a neighborhood where people want to live, because the more potential tenants that are interested in your property, the more rent you can charge, and the quicker you can fill those vacancies. You definitely want to make sure you're in a neighborhood where people actually want to rent your property. So, Joel, that was a lot of like r O I talk and numbers. My eyes closed over

for a second. Matthew, I'm not gonna lie. That's how you just like holding your beer and just staring into it like you're trying to read your fortune in the tea leaves. Well, yeah, I'm kind of I'm kind of more of a gut field guy, And I know that

sounds terrible. It sounds ridiculous. No, that's important though, I mean, and we'll get more into that here kind of after the break after in the next section too, because I think a lot of the changeibles when it comes to like location and some of that it is gut related. It's just kind of like you kind of have to trust your taste. I guess. Yeah, like you kind of have to go with your gut, but I guess for me.

So here's my thing. I know how emotional I can be, and like I get excited if I see something I like, and for me, having numbers is just a great way to kind of check myself and it's a good sort of rule. Uh. And if I have spreadsheets and lots and lots of spreadsheets, um, I can punch in the numbers and I can say, I'm really excited about this.

But then if I just look at the bottom line, if I specifically, for me, the r O. I if I look at that and say, that might be like the point eight percent rule, but I'm looking at, you know, less than a fiften r O, I almost like, well, shoot, I should maybe maybe I should just take that and just dump it straight into the stock market and invest in there instead. And not deal with the headache of,

you know, an investment property. And so for me, I guess it's just a way to not look at everything through like rose colored glasses and think that everything's gonna be coming up matt Um triple sevens. Yeah, yeah, no,

I and I completely understand that. And I think, you know, for probably for most people out there, running the numbers, you know, thinking through you know, potential real estate purchase with a lot of math behind you, you know, at your back, it creates a lot of wind in your sales, and it gives you, you know, that knowledge and the ability to know and decide if you're running the same numbers every time, you know, whether you're making a good investment.

For me, that's why the one percent rule of thumb has actually meant a lot to me over the years, because I'm not a huge numbers guy. I'm not running spreadsheets on every property. And you know, a lot of the reason I buy somewhere is is based on essentially looking at that one percent rule, deciding whether the property I'm interested comes close to there, and if it's close,

if it's in the ballpark. Then I make decisions based on a bunch of other factors like like the condition of the home and how much money it's gonna take, you know, over the right now and then over the next few years to improve and then or even how close it is to your best friend's house that he just purchased, right, which I think we mentioned in in episode four that we literally have rental homes two doors down from each other, and these are the rental homes

that are good twelve to fourteen minutes away from where we actually live. But like the profile of the neighborhood, where is that neighborhood going, what's the trajectory, and then the potential for appreciation. So if it's close to that one percent rule for me, then I'm looking at those other factors and I'm saying, you know, does this house is this gonna you know, suck a lot of money

out of me over the next few years? And you know if so, if it has you know, an aging roof and an aging h fact and it's not meeting the one percent rule, then boom, I'm probably done. Right, I'm out. It's not necessarily all these numbers that I'm running on a spreadsheet, but it's all these scenarios that I'm playing out in my head, and it's these things that I'm looking at every single time, and I've just gotten better and more astute at looking at those things.

The more houses I've looked at and the more properties that I've purchased, the more offers that I've made. And so as a potential real estate investor, that's part of it too. You're gonna learn through, you know, knowing your neighborhood looking at just the listings. Then you're gonna learn by walking into actual home, looking at houses and seeing what's potentially wrong with houses that you're looking at, and

comparing apples to apples. Hey, this house on this street looks like this and cost this much money, and then looking at a house two streets over that you know might have different factors at play. And so the more you look, the more homes you see, and the more offers you make. That's really the biggest learning curve I

think in real estate is actually doing it. Yeah, man, that's right, And so we're gonna take a quick break, but after that we'll talk more about the sort of intangible things like some of the things that are harder to quantify that you want to consider when you're looking at investment properties. Okay, we're back for the brake man. So we kind of mentioned this just a second ago.

But location, I mean essentially that's what you're talking about, right, So these sort of gut intangible things that you kind of like to go off of, you know, talk more about that. Yeah, I mean location is obviously yeah, you hear right, And like real estate location, Look, it's one of the three most important parts of finding one more time, and so location is is the most important thing for me,

and specific location matters a ton. I mean, like we said earlier, studying the market, studying the actual streets, and knowing the homes that are located there. I mean that's huge, because one block of difference in a lot of parts of town and a lot of places you might be looking can mean a world of difference and can mean a world of difference as to whether a potential renner wants to live there, and can change the r o

I can change the numbers completely. And so knowing that location in particular, how close is it to amenities, How close is it to the sounds of overwhelming traffic on a main thoroughfare, is it walking distance to nearby park? There are all sorts of things that I look at when it comes to location, and I'm looking for that

upside potential. Right, So even if a house like we we sit talked about the one percent rule of thumb, even if it doesn't meet quite that, but the location is perfect and I see a lot of upside and rents increasing well over the years. Well, man, that house still made it into my list of maybes that I want to dig deeper on if it's got that awesome location. Yeah, man, that potential for growth. You can't overlook that. You know, you don't want to necessarily count on that from the

onset like that. Okay, well this will appreciate, so it'll be better in the future. But if you're making all, if you're making everything on that, you're essentially a speculator at that. Yeah, exact, but that definitely is something that you want to consider. It's just like you said earlier, it's one of those weights that you kind of figure into this sort of equation that this sort of balancing act.

And if you know that, well, you know, the current r o I isn't quite where i'd want to see it, but I know that this has huge potential for growth. I know that that new local brewery branch is going to be opening a couple of miles from here. You know, that sort of thing where it's like people are gonna love that or whatever it is, like you we would, yeah, exactly,

like the different amenities. And so location is one of those special things where it's just very hard to quantify, right, you can't really put a number on it, and you can't just look at the numbers, you know, like if you're only looking at numbers, then yeah, well you'd end up purchasing uh, you know, mobile home parks or like self storage units, because if you look at the numbers, those you know, those kind of properties are the ones that bring in the highest amount of cash flow every month.

Like that's that's where you're gonna see the revenue. But are you gonna see the kind of growth that you're gonna see in residential areas in a trailer park. No, that's that's just not how that works. You know, double wides don't quite appreciate quite as fast as as single family homes. I'm not trying to like knock knock trailer homes or anything. That's just I mean, that's just the reality of it. Yes, So I think that's actually been my hesitation up until this point to jump into multi

family housing. UM, and I have friends to investing in areas of town that you can provide a really good cash flow when you know, with very little money down there their cheap houses, you know, they rent, they exceed this one percent rule. But in my mind, the long term upside potential of those homes, like the equity growth and just the value of the homes rising. Yeah, the equity growth and then the rent potential growth is actually

hamstrung by the location. And so while it looks good on paper, it probably looks better on paper than the home that I just purchased, you know, right now, if you're running the numbers, well, I would still choose the home that I bought in September over a home that someone else bought that has you know, better numbers right now, but is in a location that I don't consider to have the same growth potential as where I'm looking. And

so that's why the numbers are really important. But these intangibles, specifically like location and knowing what's going on around you where you live and what locations are going to be you know, hot and up and coming over the next few years. You know, that has a huge potential. Whereas rents on one house in an average location might be increasing at twenty five dollars a year, and the rents on another home and a hot location could be increasing

by you know, seventy dollars a year. So those are definitely things that you want to factor in when you're purchasing a home. Yeah, and you mentioned it's sort of like the hot or the popular neighborhoods, And that doesn't necessarily mean that we're looking at fads or things that we think are going to be cool. It can be as simple as, oh, well, this neighborhood has a sidewalk.

These are old school pieces of infrastructure that are built into neighborhoods that you just don't always see, right, So, parks, how close is it took, like public libraries to public transit. I mentioned sidewalks because for a stretch of time in the fifties and sixties, you know, when ranches were being built, essentially like typically ranch neighborhoods, you're not gonna, at least in Atlanta, you're not gonna see sidewalks in those neighborhoods.

And that does something to the walkability. It does something to the community, does something to the neighborhood. Yeah, wide streets, on street parking, especially in in town neighborhoods where there aren't garages. You know, those are intangible things that mean a lot. And the wide streets, the type of housing, uh, the you know, the infrastructure, especially parks and libraries and

and grocery stores that are nearby. Those are things that you definitely want to take into account when when you're looking for home. Yeah, and a specific tip that you can do is when you're considering a property man, drive by it or and park your car and walk around, you know, at all times during the week as well, not just you know at noon when you happen to have your lunch break, you know when at work. You want to kind of check it out at all times of the day and to see kind of what's going

on there. You want to smell the smells here, that here, the sounds, and to see if it's somewhere that you feel good about. Again, it's hard to kind of quantify because you can't say that like, oh, if the air smells fresh, you should buy it. But like there's all these small, tiny little things that kind of plays into it.

And this is I mean, Joel that you like you mentioned like your gut, that's when that comes into play like that you can't really put your finger on it, but sometimes you just have to kind of be there.

And that's one of the reasons that we love investing locally as well, to be able to drive over there ourselves, to be able to walk the sidewalks, to to check it out, to meet the neighbors, all those different kind of things that that we try to do, you know, and when we when we do our our due diligence before purchasing a home, yeah, and driving those streets, especially at night after the sun is down, that can give you good idea of kind of what is actually happening

in the neighborhood. And it can really give you an idea two of the streets in that neighborhood what is happening on them. And sometimes, you know, especially in some of the neighborhoods Matt, that you and I are looking in,

sometimes the night activity can be street to street. Some streets are super clean and you have you know, a great community in neighborhood vibe, and then other streets in the same awesome neighborhood that we like are just a little sketchier, Yeah, a little dodgy, Yeah, exactly, And so hopefully there's kids is like drawing on the sidewalks of the chalk and not drug deals going down, you know, the two blocks over, which might be the case, maybe not.

I don't know, right, you gotta check it out. Yeah, if you want to be a real estate investor, you have to start looking at things like that specific streets and driving those streets at night because you want to make sure that you buy the good rental property and not the bad one. Nice. That's enough about your gut, Joel, I mean, I make I mean, I mentioned that, but it's it's true, and it's it's definitely worth mentioning. You know.

I feel like I kind of get pinned as like the nerdy kind of numbers guy for a good reason because I love them. I love the numbers. But that being said, I mean I don't want to under emphasize the gut and something about again being there and kind of feeling it and you kind of just have to trust your taste, uh, kind of have to go with your gut and and feel like you're making a good

decision in addition to having the numbers back you up. Yeah, And a lot of those gut decisions honestly come after months and months and months of knowing a place right. So it kind of goes back to the first point. Yeah, you got to know it. I feel like, I say, it's a gut decision, but that gut it's a learned to gut. Yeah, exactly right, it's uh, it is a

learned gut decisions. You're not like yosebody sam like shooting from the hip, Like you're still making an informed decision, but you know your gut does tell you a lot in that regard. You know that that is how I picture you purchasing homes that some of you are saying, I'm just like shooting from the hip. So something else you want to keep in mind when you are looking for a home that would make a good rental is, for the most part, you want to look for average homes.

And by average, I don't mean average farming homes. I mean homes that are average to the market. And and basically you want to a home. You want a property that is going to be attractive to potential renters. What that might mean is that you're probably not looking at like the smallest of all homes available in the market, and it probably means that you're also not looking at like the hugest homes out there, because that's gonna be

hard to rent. You know, if if you mentioned this earlier, Joel, but you want a property that appeals to a lot of people, because you want to have a lot of people wanting to rent that home from you. And if you've got something overly unique or too small or too big, you're definitely limiting yourself as to the number of tenants

that you're gonna have given you a call. Yeah, if you've got an eight bedroom, five bath, you're just you're going to a limited audience, Like you're you're you're listing it on Zillo or whatever, and you're you're just listening to an audience that is almost non existent usually. And so you also, if you have a hundred and fifty square foot tiny home in the back of your house,

that's kind of cool. People like tiny homes, but for a night exactly, that could make a good airbnb, but it is probably not going to be a great long term rental for you, you know, unless you're in a you know, high density place like San Francisco or New York City, right, something like that. Yeah, that's perfectly acceptable, like a studio or a one one for a market like that. That's that's perfectly acceptable, And that's probably what

you're gonna find if you're lucky. People in Manhattan are used to living in like a coffin essentially, So if that might be okay to to buy, you know, a hundred thousand dollar coffin and rent it out for a thousand dollars a week, I don't know, think about the size, and you want it to be you know, kind of normal for the neighborhood, right. You don't want the nicest house on the block for sure, Yeah, that's right. I

mean you you want to have monest finishes. Most people that are listening to this, if you're kind of in the market for investment properties, there's a chance that you can afford nicer finishes at your own home. And I think it's really important to kind of keep in mind that you're not trying to get this property to like

your own personal standards. You're trying to provide a great property, a great place for someone to rent for short term or maybe for a long term and for a few years that they're going to be happy to live in and resist the urge to make all these different upgrades that you feel that like, oh sweet, now this house is ready to ready to go on the market. Well, well about all the people that you just priced out

by doing that. You know, if if you have it at a certain price point, people that have a ton of money and people that have a modest amount of

money could choose to to to rent that house. But if you're dumping a bunch of money to that property and you're getting like the granite counter tops on an investment property with a bunch of nice appliances, well, in order for the numbers to work, you're gonna have to charge more for it, and you're kind of pricing yourself out a little bit, and you're definitely limiting your your

potential render pool. Yeah, So the thing is you could be you know, listing it too high where you're gonna have nobody interested in the property, or you're gonna have to bring the price back down, and you've just spent money out of your own pocket for upgrades that aren't actually going to pay off in the rental price. So instead of putting in a four toilet. You know, there are great low flow toilets at home depot or lows four, right, but we know this. You can get great countertops that

aren't granite for a heck of a lot less. There are a lot of finishes that you could decide to go above and beyond on, you know, marble in the bathroom or granted in the kitchen, but those aren't gonna pay off, you know, sticking to regular tile. Making something look good and cute, that's a great standard. But making it look nice and fancy, you know, that's that's a different standard and probably one that isn't gonna pay off

for you. Let's let's set back to the beer. I love that on the ingredients section of this beer it says pure Icelandic water. That's just good to know, right man. I feel like this is just a perfect example of just like a classic stout, which is funny because I think if stouts as being very kind of American at least the current stouts, not like the English style stouts. So it's kind of cool to have this from Iceland. Yeah, so next time you're in Iceland, pick up an Icelandic

stout by Borg. This was definitely a fun one to drink. And man, I don't know why, but I always get so excited to drink beers from different countries. It's like one of my favorite things. Man, It's it's just so cool. Yeah, it's like you guys drink beer too, so we're we're the same people. We can get along. All right, let's move on from the beer. Let's do a quick recap. Yeah, what makes a good rental property? Well, first, it assumes that you want to be a landlord and you have

the money for the down payment. No property is a good rental property if you're not in it for the long haul. And since we're trying to do this as an investment and to make money, you want to make sure that you're getting a deal. And the way that you know that you're getting a deal is by studying the market and knowing the areas that you're looking to purchase, and we're looking like down specific to the street and the block. You want to be that familiar with it.

That way, when there's a deal, you can pounce. Yeah. And a great rule or rule of thumb is the one percent rule, and that means that the monthly rental income is roughly one percent of the purchase price, including those immediate repairs that need to be made to the property. That's right, Joel. Those numbers are very important, and you can dive into our o I as well if you wanted to get a little more specific unless back of the napkin type of math. But the other thing is

is you can't only look at the numbers. You gotta go with your gut. That's right, your favorite go with the gut. You want to look for specific homes and neighborhoods that have that potential for growth. There are a lot of intangibles that are really hard to quantify, but you want to take into account schools, parks, other amenities that are going to make that property very attractive to

your potential tenants. And don't neglect cash flow. That's often been the mantra of real estate investors, and while it's not the end all be all, it is an important thing to consider. You want the property that you're buying to be cash flow positive, and if it's not, you're likely making a speculative move and that's not good. So all these things that we mentioned, they're kind of like filters,

they're like weighted measures. And so you know, not one thing necessarily disqualifies a home from being a good potential rental property. But the more you are familiar with potential investment properties near you, the more you'll start to see, you know, your own formula kind of come into play based on some of these things that we just talked about. So taken as a whole, it should give you confidence when it comes time for you to buy an investment property.

Let's wrap it up. Thanks everyone for listening. Our home on the web is how to Money dot com. We'll have shown us up there for this episode, including that link to any optical cheap eyeglasses for you people that you know wear I'm and stuff. It's true, man, they're my favorite. And if you like what you hear and you've found this episode in this podcast in general helpful, we would love to hear from you guys, please leave

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