If you’re tempted to dip your toe in the property investment waters, there’s a lot to consider. From upfront costs to potential repairs, it’s important to have a solid idea of what you might be getting into.
So, before you start looking for a real estate bargain, let’s look at a few things you’ll want to consider.
When you purchase property that you’re planning to rent out or flip for profit, it’s vital that you buy for the right price. Pay too much, and you could be in negative equity from the very start. The goal is to create cash flow and build equity; or improve the property and sell for immediate profit.
If you’re looking to buy and hold the property make sure that your monthly expenses (mortgage payment, HOA fees, etc) are less than the rent that you’ll be able to charge. This is important because you won’t be able to create positive cash flow if you’re only breaking even every month.
Tip: The real estate market, like all investments, presents risk and can have it’s high and low points. The best way to avoid severe price fluctuations is to purchase in an established area.
If you want to attract top dollar in monthly rent, talk to a reputable real estate agent to find the local rental hotspots. These are areas that are highly sought after by renters and often rent at a premium due to location, convenience, or amenities.
For example –
If you want to attract tenants that are young professionals, look for communities that are densely populated, close to entertainment and dining, and near (or in) the city. However, if your goal is to appeal to families, look for homes near parks and shopping in good school districts.
get the 411… before you sign
Homes can be incredibly deceiving. What looks like a move-in ready home can easily become a cash-guzzling nightmare. Make sure that you do your due diligence up front, even if it costs you a little on the front end. Because once you sign on the dotted line, the home is your complete responsibility, repairs and all.
- When you can, get a seller’s disclosure. Not all foreclosed, REO, or HUD homes will have these.
- Make sure that you have a professional home inspection completed on the home. If you’re buying a foreclosed home there may be restrictions or stipulations on having an inspection completed. Be sure to check the listing or ask your agent.
- Get a termite inspection.
- Look for signs of concern like wall and ceiling water stains, cracks in the brick facade, and uneven floors.
Since you’ll likely be looking for an undervalued property, be ready to do some repairs… just try not to get in over your head with improvements that you weren’t expecting and can’t afford!
you can hire out what you don’t know
Just because you own the property doesn’t mean that you have to be handy with a wrench, know how to fix a leaky faucet or be on hand for tenant needs, twenty-four seven. While initially, you may take on the responsibilities of managing your properties, you’ll like want to outsource these responsibilities.
Remember, you’re the property owner. This doesn’t necessarily mean that you have to solely take care of all the nuances that can come from the day-to-day operations of managing the property. Consider bringing on a property management firm (read more on this website). For a flat fee or percentage, they will locate suitable tenants and take care of the maintenance of the property.
always consider all of your options
Not sure you want to be a landlord? It’s okay. There are several other ways to make money in real estate. If you want a faster turn around of profits, look into flipping a home. Or, if you don’t want the responsibility of buying and managing or transforming property, consider a career as a real estate agent. You get to help others make home and investment purchases and potentially build a lucrative career! Win-win.