Investing in residential real estate and buying some rental properties that can boost your portfolio of investments, is something everyone serious about finances considers. Here are the most critical features to consider when investing in a property for the very first time and tips and tricks on ensuring that you will choose smart and eventually be satisfied with the choice you made.
Although extremely rewarding, real estate can be a minefield when it comes to extra expenses. You have to be careful with every step if you want to succeed and have a return on the investment you made. Real estate requires comprehensive research before you make the first steps, as it is essential to be aware of all the advantages and disadvantages that might arise from the investments in real estate.
The Beginning of Your Search
Before you decide to look for a professional service, do personal research first so you would be clear on what are the things that matter to you and what are your requirements in terms of size, type, location, amenities, or related. Real estate marketplaces like Roofstock make this process really simple.
Do not let real estate agents pressure you into purchasing a property without finding the characteristics that suit you the best first. When you are clear with what you are looking for, then ask for the professional help of a real estate agent.
One additional thing that you might consider is whether you will be managing the property by yourself or someone else will do this for you. If you are the one to manage the property, it will be better if you look for an estate that is nearby your current residence as the proximity means a lot. However, the same does not matter much if you hire a company to manage the property.
What Are the Best Ten Features That You Should Take Into Account?
Tip#1 Make Sure You Have Seen the Neighbourhood
The neighborhood is on the top of our list because it defines the type of tenants you are after as well as the rate of vacancy. An example of this is an area that is close to university centres which will mean that you are looking for tenants who are students. This, on the other hand, will mean that the property might be empty during the vacation periods or that you might even change tenants often. Make sure you also check if there are exorbitant permit fees as this is the case with some towns. This scenario might be discouraging for rental conversions.
Tip#2 Find out the Amount of Property Taxes
Taxes can be a considerable deal-breaker when it comes to the property market. If you have chosen a target area, make sure you have a look at the property taxes that are to be paid. If the neighborhood is appealing and there are big chances for long-term tenants, the taxes even if higher, can be worth it. However, often high taxes may occur with some locations that are not that attractive for long-term tenants. To find all about taxes, you might discuss this issue with the municipality tax departments or even the homeowners who reside in that community. Inform yourself if possible about plans regarding the tax issue. It is essential to be aware of how much you might lose with the taxes and whether you can charge this realistically in the rent.
Tip#3 Ask About the Schools in the Area
Educational institutions like kindergartens and schools can be a good selling point for the property that you are renting or eventually selling. The investment value overall increases if there are some good schools in the nearby environment, especially this can be vital if you are working with family homes.
Tip#4 Inform Yourself About the Crime Rate
Another thing that is worth checking regarding the neighborhood is the crime rate, including theft, burglary, vandalism, or other crimes. The local library and most definitely the local police office is an excellent place to do your research about the ongoing statistics for that particular area and the surrounding neighbourhoods. Of course, the internet will also usually provide all the information you need
Additionally, you can inform yourself about the police presence and whether the rate of crime is declining or rising or maybe keeping steady, so you can have a clearer picture of the location and the safety and security around.
Tip#5 Check out the Job Market in the Target Area
Areas where businesses are located as well as commercial buildings might be attractive for the job seekers and young people and families. Major companies attract workers who flock around in the nearby areas as no one wants to travel hours to the workplace so the areas that high rating for job availability might be a good location for investment. Sometimes the prices can increase and sometimes decrease because of this factor, which mostly depends on the kind of involved business. Always consider these elements just like you are purchasing or renting this property for yourself
Tip#6 Walk Around the Area to See the Amenities
Walk around the neighbourhood area. Check the public connection and public transport means. Explore the dining options as well as entertainment options such as parks, cinemas, or the fitness and health facilities as swimming pools or gyms. All these facilities can be attractive to the possible tenants. Look for promotional literature as this might give you a glimpse of how things function around the area in a short time.
Tip#7 Make Sure You Find out About the Future Development
When purchasing real property, one vital thing that is a must-do is to check the plans or future project development of the area. The municipal sector that works with planning should have info on the current and plans for construction and building of surrounding properties. If there is a construction of similar building properties, this might influence the price.
Tip#8 Check the Number of Available Vacancies
If the location that you are looking like a possible target for purchase has a high number of vacancies or listings, check the reasons for this and find out the prices of rentals at the time being. When there are lots of properties for rent, usually the prices go down due to the competition, while when there are low rates of vacancies, the owners of the apartments can raise the rents.
Tip#9 Consider the Average Rents
Consider the average rents in the residential area that you are planning to purchase an apartment. When considering a property, ensure that the lease might cover the expenses such as taxes and mortgage payment. Do a detailed research of the area and forecast where it is going in the years to come and choose smart as if there is an expected rise of the taxes, and you are purchasing something that you can barely afford now this in the future may lead to bankruptcy.
Tip#10 Natural Disasters
Insurance is always a good thing to consider when purchasing a property. Consider this in the expenses and subtract this sum from the returns. Check if the neighborhood has been known for natural disasters such as floods or earthquakes as this might be costs that undermine the income from renting the property.
Get the Information From First-Hand
All the sources are valuable to get information from, but getting the info from first-hand or people who live in that area is much appreciated. We strongly advise you to talk to people who rent the apartments as they will be honest about living in the neighborhood and all the pros and cons. Walk around the neighborhood during night and day times or on different days so you can feel the real vibe.
How to Choose a Property
If you are a beginner and this is the first property investment that you are making, the best thing that you could do is to purchase a condo or free-standing residential building. Each of the options has its pros and cons when it comes to renting opportunities. Condominiums are suitable for investment because the association is the one that manages the external repairs so you would not have many expenses for such matters. Still, on the other hand, they collect lower rents compared to the other properties, such as single-family houses. These houses are rented by couples or families who are usually long-term tenants and have the financial stability that guarantees regular paying of the rent.
When you decide about the neighborhood, try to find properties within the set limit but also one above your budget as frequently, you can negotiate about the price. It is crucial that they might have good potential for appreciation and good cash-flow.
To get a clear picture of the property value on the market, check other similar properties and their listed price as well as the final prices under which these properties were sold. If you want to check the appreciation potential think about all the renovations and some interior design changes or cosmetic amendments that can be performed. This will add value to the property, and it would be easier to find renters who will agree to pay higher rent.
One of the critical steps to guarantee that your investment will turn out profitable is to purchase a property at a reasonable price. You should not pay more than twelve times the expected rent per annum.
Determining the Rent
If you are not certain about the amount of the rent take into consideration the average rent for the properties of the kind you purchased in that neighborhood and start from there. If you believe that your place worths more or less than this average price set the price accordingly. Avoid setting too high rent as you might end up with unleased property for months.
To check which amount will work for you as rent, calculate the total costs for the place you are to purchase. From the total amount you should subtract the mortgage, you are expected to pay per month and divide the property taxes and insurance costs by twelve months and subtract all these together with the expected maintenance and repairs allowance.
When calculating the costs for maintenance of the property take into account its age and the work you can do it on your own. The older the property is the costs are higher and vice versa. It also depends on the type of building. If the building is for senior residence, the damage amount will not be the same as college building housing.
Additionally, you have to decide if you are going to hire a company that will manage the property or you are going to be a handy-man. Maintaining the property by yourself cut the costs, but on the other hand, it can be tiring to be on call all the time. The company can cost you up to 10% of the rental fee, but some companies take care of all the details, maintenance, breakage, and failures up to collecting rental payments every month.
If you are satisfied with the estimate and calculation, you can ask the estate agent to help you out with creating and submitting an offer.
Making the Purchase
If you are thinking of getting a loan for the property, make sure you ask about the bank requirements and check all the documentation, you will need for an application. Overall, regardless of the bank, you choose you will have to pay a down payment of 20 to 30% and the costs for closing the deal. Before you start signing the documents, call a professional to inspect the property in detail, and consult a real estate lawyer about the contract.
One thing that you have to take into account when calculating the costs is insurance. There are different types of insurance, renters’ insurance which covers the belongings of the tenants and one that includes the building costs, and this is part of the responsibility that belongs to the landlord. The latter could cost more for the landlords compared to the same property if it was owner-occupied. However, the insurance, together with the deprecation and mortgage of the property is subject to a tax deduction.
The Bottom Line
Between the moment you decide to make your first investment in real estate property and the actual purchase of one, there should be a lot of field research on the city, neighborhoods, and good or bad properties. Do not expect quick cash-flow but rather set your goals realistically. Take into consideration the criteria presented in the article when looking for a property and make sure they are in compliance with each other and with your budget which is stable at the moment of buying and can cover the expenses until the real property generates cash.
new townhomes -DepositPhotos
The post Top 10 Features of a Profitable Rental Property appeared first on Tweak Your Biz.
source
https://tweakyourbiz.com/management/landlord-management/choosing-rental-properties