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How to Boost Cap Rates by Buying Great Tenants

I could make a list a mile long, and it still wouldn’t cover everything a person could check or all the mistakes I have made. There is one circumstance where an investor can actually visit a tenant in his or her home: When buy the house they live in! Quality tenants are worth buying. If you are a numbers person, think about it in terms of cap rate. Consider a $100,000 house, financed for 20 years, that rents for $1,200 per month. Here’s how a desirable, high quality tenant could affect your investment: Longevity When a tenant turns over, it costs money. Responsibility It’s harder to quantify what minor maintenance is worth. If a quality tenant puts up his own ceiling fan or fixes a leaky bathroom faucet, savings can easily get to $50/month on average — for another .3 percent on the cap rate. In our example house, this can amount to over 2 percent on the cap rate. Look for hidden value in single-family homes by buying great tenants, and reap the benefits for years to come.