The secret to increasing cash flow: investing in opportunity zones
A wise man will seize more opportunities than he finds. ~ Francis Bacon
Don’t just look for homes that meet your criteria, look for the home that meets your criteria in places where people like to rent. There are nice areas in my city and not so nice areas in my city. However, neither of those two areas is where most people like to rent properties.
There is a zone of “opportunity” between the nice and not-so-nice areas where people are eager to rent and where house values are relatively lower, but where moderately high rent can be charged. There are good and bad houses in these areas, but there are usually supermarkets and shops within walking distance, often close enough to walk.
Advantages of opportunity zones
Opportunity zones have a fundamental advantage over other areas of the city: you can earn more money with them. There are two reasons for this:
1. You pay less for a rental property in an opportunity zone than you would for a comparable property in a nicer neighborhood.
2. You can charge about the same rent that you would in a nice neighborhood.
For example, I have two houses in two different parts of the city. I have a house in a nicer neighborhood on the outskirts of town where new growth is taking place. I pay $ 700 on the mortgage and receive $ 875 in rent with a profit of $ 185 / month.
I own a second home in an opportunity zone neighborhood, close to the central part of the city where property values are lower. For this house, I pay $ 525 on the mortgage, receive $ 750 per rent, and make a rental profit of $ 250 / month.
It’s not about how much I earn each month on a home, but how little I pay on the mortgage which is the biggest profit in the opportunity zone!
Why do people choose to live in opportunity zones?
1. Cost. As mentioned, the cost of buying property is cheap, and when you can walk to buy groceries and other staples, you pay less in gas.
2. Convenience. Many people want to reduce their dependence on the car.
My experience in the opportunity zone
When I bought my first house, I bought it in an opportunity zone. My wife and I liked the house because the price was right and because of the location, nearby shops. Not only would we go for a walk to buy food and rent movies, but we would also walk around the neighborhood at night to get some exercise.
The area was a mix of all kinds of dwellings. In a four square block where we lived there were owner-occupied houses, townhouses, apartments, and trailer parks. Our home was located three blocks from two supermarkets, a video rental store, 7-11 and Circle K stores, an auto parts store, a Taco Bell, a McDonald’s, and a pharmacy. Of course, there were also some rougher edges in the neighborhood, some strange characters in the neighborhood, but they were in the minority.
We lived in that house for 9 years. Then we bought another house and kept our first house for rent. I recently bought a second house on the same block. It has been a place where it is very easy to find good tenants.
I don’t feel like living in that area again, but it is a place where I love having rental properties.