Are you thinking about investing into a rental property. Is your goal passive income or are you trying to grow equity? You’re probably like me and have many questions. Here are some secrets that will help you navigate the world of rental property investing.
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What is being built nearby?
Are you near a growing night life scene? Is a school being built near your property? These are important factors in the renter decision process.
What’s happening in the local market?
Are people moving out of the local market in droves? If so, you may have an area where people don’t want to live. This is very important. If people don’t want to live in an area, that’s cause a lot of friction to find renters.
Are you in a buyer or seller market?
If you in a seller’s market, great! You can wait for the right renter and ask for more money a month. This is a great position to be in.
If you’re in a buyer’s market you can’t be picky. You may have to take less money per month for rent. Your target minus $100 per month is still more money than you target per month with no tenant in your property.
Here’s a great video from Redfin explaining how to know if you’re in a buyer’s or seller’s market.
How the competition for the property?
If you want to attract tenant, you don’t want the house that’s the dump of neighborhood. Do you want to live in a dump? No, your future tenants don’t want to either. Pay attention to other properties in the area. If you on par or better than the average of all the homes, that’s a good spot to be in.
What’s included with the sale?
Many times, you tour a property and see a lot of amenities. Some amenities can be a washer and dryer. The amenities you see may not be included in the sale. Be vigilant and make sure you understand what’s included.
How should I keep with with the maintenance?
You may get a great tenant that loves mowing the lawn or you get a tenant that is terrible at cleaning the pool. Make you life and theirs easy by making maintenance as hassle free as possible. Bake all these services into the rent. Be very clear of what they’re getting. Breaking down the cost and presenting it can helpTips for buying a house to rent out
What’s the state of the services used at the property?
Be mindful of services like lawn care. You may elect to use another service. However, the property may be under contract for the next few years for a given service.
How do I determine the value of an investment property?
This one is very easy. Most home purchase require an appraisal before a sale can be complete. The appraisal is pretty accurate in determining the value of the house. If you are thinking about making improvements to the property, you can also working with the appraiser to create a new estimate to determine the value of the property after the work is complete.
What is the best real estate investment strategy for me?
The answer to this question is it depends. I mainly see two types of real estate investors. First, is the investor that want to get a return on capital as soon as possible. Next, we have investors that want to buy for value. They’re trying to acquire properties pennies on the dollar. You will have to figure out what works for you.
How do I find a profitable investment property?
Find people that have already been successful with investment properties. Ask them questions. You can learn a lot from their experience. Make sure to ask about their mistakes so you don’t repeat them.
Can I begin investing in real estate with no money?
It’s possible but not easy. Here’s one way. You’ve lived in your current home for 5 years. For 5 years you’ve been paying interest on your mortgage. You’ve also built equity. You can obtain a home equity line of credit (HELOC). You can use the HELOC to purchase or put a down payment on another home. This does stretch you finance so be careful. In the scenario above you now have two mortgage and a HELOC. You very quickly went to having to pay for 3 things every month.
Is the property in an enticing location?
Location is so import for potential buyers or renters of your property. If your property is by a lake great. This can be ideal for a person that likes to fish during the weekend. If your property is close to night life, younger renters may find the location very attractive and consider it a perk of living there.
Is this a high or low maintenance property?
Low maintenance properties are ideal. Sometimes you can find a great property at the right price, but there’s a lot of maintenance for that property. Should you get the property? Ultimately you have to make that decision. The key is to know how much maintenance is in play before you buy the propery.
Do the numbers make sense?
No matter how many mortgages you have, you should account for the worst case scenario. Let’s say you have 3 homes all with mortgages. You live in 1 and rent out the other 2. The worst case scenario is that you have to pay for all three mortgages in a given month. If you can’t afford this, the numbers don’t make sense to me.
Here’s another scenario. Let’s say you outright own all 3 houses with no mortgages. Can you pay the property tax for all 3 if you don’t have renter? If the answer is may be or no, the numbers don’t make sense.