Wow! The housing market continues to be hot! Every day I talk to investors who are not only looking for great deal properties to fix and flip, but they’re also looking for great long term buy and hold rentals. So, if your plan is to fix and flip, are you overlooking the importance of rental comps when evaluating potential investment properties?

I know… I know. If you’re a fix and flipper, you’re thinking, “Why should I care about rental comps when I don’t plan on keeping the property long term?” Here’s why…

Unfortunately, we often see too many investors, especially newbies, run into trouble and put their financial futures at risk. How you ask? Well…. in a best case scenario, you’ve done all your research, you know the ARV, you’ve completed all the necessary repairs, completely rehabbed the property, and now it’s time to put the property back on the market. Miraculously, it sells in one day! Woohoo! That was the easy scenario.

But what happens if it doesn’t sell right away and instead the property sits on the market for a while? Do you know how quickly your profits can be swallowed up by carrying costs? You know, things like mortgage payments, taxes, insurance, HOA dues, etc., etc.

So, what’s plan B? Remember, when flipping properties, you need good solid exit plans, and preferably multiple plans in case your primary exit plan doesn’t work out. If you have trouble selling the property, then plan B might be to rent it out. If you don’t pay attention to potential rents up front and you end up trying to rent the property later, you could end up with negative cash flow on your hands. Yuck! You REALLY don’t want that!

Although renting out your investment property is a great way to create some passive income (if structured correctly), many investors have no idea how to go about determining whether or not a specific property would be a profitable rental or not. This is something you should definitely know before purchasing any investment property.

When looking at rental data and rental comps, you want to look at many of the same factors that affect sales comps, such as living area square footage, number of bedrooms, bathrooms, property condition, pools, parking spaces, and of course, location.

There are a lot of online tools for pulling rough rental comps including, Trulia, Hotpads, Craigslist, Zillow and Rentometer, but in many cases, the prices can be inaccurate due to overpriced rental listings no one is willing to pay. These tools also do not take into consideration the types of renovations done or the number of days on the market.

For example, if a comparable property across the street from yours is asking $1,300 a month and it has been on the market for 90 days, it’s a pretty good indication that the market is not willing to pay that. As you can see from this example, there can be a huge difference between asking rents and actual rents. In short, one house might be asking $1,300 a month, while an identical unit next door could have just leased for $1,000 a month. The market will always let you know whether or not something is too high or what the area will allow.

Obviously, the best way to know what your property can rent for is by using actual rental comps that will tell you exactly what people are paying for similar properties. So, having the ability to access and evaluate accurate rental data and rental comps is crucial for all investors.

This is EXACTLY what we provide through our SmartMap ARV and Rental Comping System!

Don’t take a chance and get stuck with a deadweight deal and negative cash flow because you failed to do your homework on rents and rental demand.

Our SmartMap ARV and Rental Comping System really does it all for you! Stop wasting time and spinning your wheels trying to find the deals. Try our ARV and rental comping system for 10 days, absolutely free (no credit card required). Go to www.SmartMapComps.com to get started. I promise, you’ll love it.

Looking for your next fix & flip or rental property but need help finding the best deals? Go to www.TheEquityFinders.com/get-started/ and tell us what you’re looking for. We’re always here to help.

by Marco Leone, The Equity Finders/HomeSmart