Tips for Investing in Real Estate Properties
Are you thinking about buying an investment property?
Rental properties are a new and exciting endeavor, that more and more people are becoming curious of entertaining. Before making the leap of purchasing an investment property (or two or ten), here are a few questions you should ask yourself.
1
Cost
How much will it cost me? Besides sales price, you should factor in property taxes, insurance, utilities, HOA's, maintenance fees, etc.
2
Insurance & Accounting
Be sure to talk with your insurance provider and tax accountant to understand the expenses associated with a rental. If approached strategically with the help of experts, you can increase your ROI year over year.
3
Location
Location, location, location! Be conscious of the home’s neighborhood and surroundings so you appeal to renters. If you are counting on rental income to cover the mortgage, you will want to ensure you capitalize on an ideal area to make the numbers work in your favor.
4
Price
Think about how often you’ll want to rent the property. Will you have long-term tenants or do you plan to utilize a company such as AirBnB for short term rentals? From there, you should research what other homes are renting for in your market, and understand the income potential based on the properties attractiveness to potential renters compared to the competition. This will give you an understanding of what your total income vs. expenses is projecting to look like.
5
Hired Help
Will you need a property manager? Many people start out doing all of the work themselves (advertising, screening tenants, cleaning, regular maintenance, etc.). If this is not for you, be sure to account for a property manager fee of 10-25%.
6
Emotions
Are you rushing into the decision? Don’t let impulse pressure you into an unwise purchase. Do your research! Take your time and sleep on the idea for a bit. It is a big decision and should be treated as one.
One last thing to keep in mind is liquidity. Real estate investors are typically in it for the long haul. Allowing renters to pay off your mortgage does not happen over night.
If you’re looking for a “quick fix” investment properties such as multi family homes (2-4 units) may not be the right fit for you. Be sure you align your goals with your timeline to determine realistic expectations that will deliver the best outcomes. I am always here to help answer any questions.
Happy Hunting!
Jen
P.S. I am not a licensed investor. These are all personal notes on how I strategically approach real estate investments based on my experience.
Real estate investor, landlord and DIYer, Realtor, Business consultant, Globe trotter & Converting vegan.
