Haley Equity

Tag: Investment Strategy

  • Landlord vs. Renter-Friendly States: How Policy Shapes ROI

    Real estate is local—and so are the laws.

    Some states make it easier to be a landlord. Others don’t.

    Most real estate investors focus on purchase price, rent, and rehab costs—but state policy can quietly shape your returns.

    Laws around evictions, rent control, and property rights have a direct impact on your cash flow and risk profile.

    In landlord-friendly states, investors can move faster, enforce leases, and protect capital with fewer regulatory barriers. In renter-friendly states, slow processes and added restrictions can quietly eat into returns and increase long-term risk.

    What Is a Landlord-Friendly State?

    • Allows faster evictions for non-payment
    • Has no rent control
    • Offers clear legal protections for landlords
    • Favorable court interpretations for property owners

    What Is a Renter-Friendly State?

    • Long eviction moratoriums or complex court procedures
    • Rent control laws that cap increases or require approvals
    • Strict limits on screening or security deposits
    • Mandatory lease renewals or “just cause” eviction rules
    • Legal precedent that heavily favors tenants in disputes

    Final Thought

    Choosing to invest in a landlord-friendly state can mean faster evictions, fewer regulatory hurdles, and stronger protections for your capital. Renter-friendly states may offer growing populations and rising rents, but often come with slower processes and added risk.

    Smart investors weigh policy just as carefully as price—because the law affects the bottom line.

  • Cap Rate vs. Yield-on-Cost: Know the Difference or Risk Overpaying

    Cap rate is easy to learn—and even easier to get wrong

    Cap Rate measures a property’s return based on income generated before financing.

    Yield-on-Cost measures a property’s return based on income generated after financing.

    Let’s say a property generates $40,000 in Net Operating Income (NOI) and is purchased for $500,000:

    This means it’s producing an 8% yield on the purchase price.

    What Cap Rate Tells You

    • A benchmark for comparing similar properties in the same market
    • A gauge for risk—higher cap rates often signal higher risk
    • A metric for valuing income-producing properties

    In general:

    • Lower cap rates = stronger, more stable markets (lower risk, higher price)
    • Higher cap rates = secondary or emerging markets (higher risk, lower price)

    What Cap Rate Doesn’t Tell You

    Cap rate is useful—but limited. It doesn’t account for:

    • Debt serivce or financing
    • Renovation or capital expenditures
    • Tax strategy
    • Future income growth or lease-up risk
    • Resale value or appreciation

    When to Use Cap Rate

    Cap rate is best used for:

    • Initial screening of potential acquisitions
    • Comparing properties in similar markets
    • Rough valuation of income-producing assets

    Cap rate is less effective for:

    • Value-add or renovation projects
    • Deals with heavy leverage or irregular income
    • In-depth financial modeling or return projections

    Cap rate shows what the property earns. Yield-on-Cost shows you yield after debt servicing.

    Final Thought

    Cap rate is a helpful tool, but not a complete picture. It should be viewed as one data point among many—alongside metrics like yield-on-cost, IRR, and equity multiple.

    While cap rate doesn’t account for financing, strategic use of leverage can meaningfully enhance returns when used responsibly. Smart underwriting paired with the right debt structure can turn a good deal into a great one.

    Smart investors use cap rate to start the conversation, not to end it.