Many wealthy people invest in real estate to generate income and improve their net worth. While the number of black women purchasing homes has risen, we’re still a little hesitant to buy real estate as an investment. It’s time that changed.
If you’ve been considering purchasing investment property but aren’t quite sure where to start, this mini-guide is for you.
There are a number of factors that you’ll want to consider before you make your first purchase; including location, rentability, expenses, and potential for appreciation. Sounds like a lot, but once you get a good understanding of the process, you’ll be on your way. Here are a few tips to help you get started.
do your research
This advice is universal for any investment you’re considering, but doing your due diligence when purchasing property is even more important because you want to make sure that you buy right! Have a thorough analysis completed on the local market by your real estate agent. Or, have them show you how to do your own.
Learn the characteristics of the homes that are selling versus the ones that are not. Understand how to properly value properties in your area and become well versed in the proper way to assess rentals, their appeal to tenants, and competing properties. It will be a learning curve. But it’s well worth it.
understand the expenses… before you buy
Don’t think that your expenses stop with the purchase of the property. Get clear on exactly what to expect; including taxes, insurance, repairs, improvements and property management (if you chose to outsource the property management for your properties).
Tip: If you don’t want to deal directly with tenants and instead want to focus on accumulating more property, you may want to hire a property manager or a management company. You don’t have to go with your local real estate agent. In fact, you’ll want someone that understands the nuances of managing the property and the tenants. Look for companies like https://719rent.com/property-management/areas-we-serve/colorado-springs-colorado/ that specialize in single-family rental home management.
If you’ve never bought investment property before, you may have a tendency to only consider your initial costs. As an investor, you’ll need to think about ongoing expenses as well as unexpected emergencies. Detail out the needed repairs and renovations and potential holding costs for the approximate time that the home will sit vacant. It’s important to crunch numbers as much as possible to ensure that the property is worth the total investment you’ll be making. When you do, you’ll not only be confident in your purchase, but you’ll be better prepared to maximize your long-term cash-flow.
Once you have acquired the knowledge that you need to get started, be prepared to negotiate a deal. Before you write a contract, know the absolute maximum amount that you’re willing to pay, and stick to it. Never be afraid to walk away if the price doesn’t match up.
screen your potential tenants
Think about who your tenants are likely to be. If you live in an area that is close to a university, your tenant pool will consist of students. Perhaps you live in a commuter zone and they will probably be young professionals. The idea is to not just fall in love with a potential property but to also get familiar with the area.
Once you have an idea of who will be renting your property, you’ll be able to make predictions on how easy it will be to rent the home and how long people are likely to stay. Put in place a careful tenant-screening process that helps you find the right people. Be sure your process includes a background and credit check, employment/income and prior rental history verification.
create a strategy
Once you’ve done some research and you’re a little more familiar with the process, think about your overall strategy for growth and development. Perhaps you will start with single-family homes, before moving on to multi-unit properties, and maybe expand to the commercial real estate market in the future. Whatever your goals are, be sure to map out a strategy to achieve them!