Where to Invest in the Best Rental Houses

By Dr. Steve Sjuggerud

Monday, March 12, 2018

"Steve, rental houses here at the beach are a terrible idea," my friend Brad Thomason told me last week.

"If you want a REAL income on a rental house, you need to go to Cleveland, Tennessee."

Brad would know.

He has done more unique real estate deals than anyone I know. (He guessed the number was around 15,000.)

I have made A LOT of money listening to Brad.

When I was on the courthouse steps at the bottom of the housing crisis, buying distressed real estate at auction, I would call him on my way there for final words of advice. Some of the deals I made at those auctions earned me hundreds of thousands of dollars.

"Think of every property you buy as buying another headache," Brad told me a long time ago. "You have to ask yourself... Do you really want THIS PARTICULAR headache?"

It was good advice... And I've relied on it many times since then. Today, I'll share some of his latest advice with you...

When we caught up recently, I asked him where the best opportunities in rental houses are... and if he has any simple advice for someone getting into buying rental properties.

Here are a few thoughts from Brad, after having done some 15,000 real estate deals.

1.	Your best opportunity for high income today...

"The best opportunities for rental income are in Middle America. You can buy a house in Mississippi or Indiana for $90,000 and rent it for over $1,000 a month."

2.	Use the "1% Rule" when buying to rent.

"Use this simple test... If you can rent out a $200,000 house for $2,000 a month, then you can probably make good money on it. That's the 1% Rule – 1% a month. If not, then you might struggle to make money on it. Don't rely on capital gains. They may not arrive."

3.	Think beyond your hometown when buying a rental property.

"Real estate investors think they have to buy a property in their hometown. You don't! You are much better off buying in Middle America with high income potential and paying a property management company. It doesn't make sense to buy a rental property in California just because it's close to you, even though it has a terrible return."

Brad is both extremely smart and experienced in making money from real estate deals.

If you follow his three ideas, I'm confident you'll do well earning a high return on your rental properties. If you go against his ideas, realize that you're limiting your upside potential relative to what's out there...

Good investing,

Steve

P.S. For more on Brad Thomason, check out this web page right here.

Further Reading:

In this classic essay, Steve recalls one courthouse auction when Brad's advice taught him NOT to invest. "Just because an investment could make you a big return, doesn't mean you should do it," he explains. Read more here: Is That a Legitimate Shot at a 200% Gain? Or Just a Headache?

Real estate stocks can be another profitable way to invest in property. "Some real estate stocks offer growth... Others offer value... And others offer income," Peter Churchouse explains. Learn more here: How to Diversify With Four Unique Real Estate Investments.