Investing in property has become popular. Some investors are experienced, know the lay of the land, and play their hand well. Others have just enough information to be dangerous – they set out to flip a property to make a few bucks or imagine they’ll get rich quick in real estate if they become a landlord. Unfortunately, that doesn’t always work out so well. So how do you know when you’re ready to invest, know enough to invest wisely, and which properties make good investments? Here’s how to identify a good investment property.
What’s Your Reason?
First, assess your reasons for purchasing an investment property. For example, you may consider buying a condominium in a resort vacation destination so you can use it for a portion of the year and rent it out for the rest. You’re not alone; it’s a great idea. However, make sure you understand the tax implications of owning a property that you live in a portion of the time and rent out another part of the year. Furthermore, some homeowners associations in condominium communities have rental restrictions making short-term vacation rentals null and void, extending only to long-term renters. Knowing why you want to will help you find properties that match your long-term real estate investment property goals.
The Funding of Dreams
Owning investment properties sounds prestigious and conjures an image of a real estate mogul rolling in dollars. But before you can invest, you have to have funds, and funding investment properties is a bit trickier than applying for your starter home mortgage loan, especially when you’ll be owning multiple properties and mortgages. Application requirements may vary, and will undoubtedly take much longer than a standard home mortgage loan application.
Separating Fact from Fiction
It’s not a good idea to buy a property sight unseen with the hopes of doing a quick flip for a profit. Television experts may be able to gut a house down to its foundation and redo the wiring and plumbing in 48 hours for under budget, but that’s not a realistic picture of property investment.
When considering investment properties, gather as much information you can about each property’s history. How many times has the property switched hands, and why? What is the real estate trend pattern in the area – has the market been steady or have there been lots of peaks and valleys? What insurance claims have been filed on the property, and why? Your goal is to assess how well the property has been care for, as well as its history with gaining or losing value over time.
By gathering facts about the property’s history, you’re able to determine the story attached to a particular house, but what about the neighborhood? Has the neighborhood appreciated, depreciated, or remained steady over the past ten years? Are there parks nearby? How close are the shops, restaurants, and recreation? What do you know about the area’s schools and their performance ratings? Think about the types of clients certain neighborhoods might attract. For example, if you buy an investment property near a university, many of your rental applicants will be college students and you may face heavy vacancies during times of the year when school is not in session.
Know who is managing your property once the tenants move in. You can hire a management company who can oversee payments and repairs, or you can be a hands-on landlord who handles all aspects of managing their investment property.
When you’re buying a forever home or a starter house, there’s a nostalgic bond that makes it difficult to think about moving out when dreams of moving in are still on high power. But when you’re buying an investment property, there’s got to be an exit strategy, a plan for transitioning the property to another owner.
The idea of owning investment property is intriguing. The idea is intriguing because we’re all familiar with success stories of real estate investment properties. When you’re prepared, purposeful, and know the right steps, you can become a successful real estate investor. However, if you’re inexperienced and unprepared, you could be in for costly and uncomfortable business lessons.
Your real estate agent is the best source of information about the local community and real estate topics. Give Rachel Tullier a call today at 225-278-7595 to learn more about local areas, discuss selling a house, or tour available homes for sale.