Investing in real estate is a wise decision. As a landlord, you stand to make a lot of profit on your property. However, when it comes to real estate, doing your due diligence is crucial, particularly when you’re investing in property for the purpose of leasing. A poor investment can be a killing blow to your savings account.
Investing in the right property is not as easy as it seems. It takes time and research to make the best choice. Do you know what questions to ask when it comes to buying a property for leasing? Do you know what characteristics to avoid? Read on to learn how to make a wise investment in property.
1. Buy at the right price.
Learning how much you should spend on a property requires thought and research. You want to buy something at as low a price as possible, of course; however, if you buy a derelict property, it will cost a lot of money to fix up. Similarly, a property in the wrong neighborhood will be difficult or impossible to rent, turning what you originally considered profitable into a big financial blow.
Take a look at a few neighborhoods and determine what the average rental prices are for different kinds of properties. You need to become educated enough in local real estate prices to quickly recognize a bargain when you see one. Your competitors are out looking for cheap properties with potential as well, and the real bargains will get snapped up right away. When you find your ideal property, you must be prepared to act quickly.
Begin your research in the local classifieds. Even just a few hours of research will give you a lot of information on your area.
2. Keep utilities and taxes in mind.
It’s easy to forget the other expenses involved in buying a property beyond the initial purchase. Costs like utilities, taxes, and mortgage can be shrugged off at the planning stage as small potatoes. However, these costs add up.
When choosing a property, you must do the math for how much it’s going to cost to simply own the property. Utilities, mortgage, and taxes can be somewhat worked into the rent you end up choosing to charge; but remember, if your rent is too high, you’re not going to attract tenants. You must be sure this investment is going to lead to a profit.
3. Pick the right neighborhood.
Most cities and towns, from small ones to big ones, have some popular neighborhoods for renters. When choosing the right neighborhood, there are many considerations to balance against each other. You want to pick a safe, aesthetically pleasing neighborhood where tenants are going to want to move. However, buying a property in an expensive part of town where nobody actually rents is not going to earn you anything.
Again, your local classifieds can help you figure out where a lot of properties are being advertised and the price range of the rent. Some neighborhoods are more welcoming of newcomers than others. This is something to consider; it may not be profitable (or moral) to buy a property in an old, established community. You never want your property to be the worst looking place on the street, or you may receive complaints.
4. Budget for repairs.
Almost any property you purchase is going to need a few repairs or some sprucing up to get the best possible rent. If you buy a place that’s a fixer upper, it can be a great investment once the work is put into it. However, it’s important to get a solid understanding of how much repairs may cost and to plan for them.
Budget to correct any problems with your property within the first year at the latest. Ideally, you should fix it up before renting it at all.
5. Get educated on local rental laws.
Being a landlord is more complicated than simply buying a property and getting rent from the first people who are interested. Federal, state, and local laws regulate landlord-tenant relationships. It’s common for rental properties to be legally considered closer to businesses than residences, and there are also special building codes regulating what properties can be rented.
Even if a building looks perfectly safe and habitable, it may not meet legal requirements for rental in your area. Before purchasing a property, it’s important to assess whether that property may legally be rented – and if it may not, how much money must be put into it to get it up to code. Renovating a property to be compliant with local laws can sometimes cost tens of thousands of dollars.
Most properties need a few tweaks to be legally rented. Before making a purchase, understand what must be changed and how much it will cost to make the changes.
6. Choose a simply constructed property.
When you purchase a property, it’s important to understand that you will be maintaining and repairing that property. If you choose a historic building with peculiar shapes in its construction, it may be expensive, difficult, or even impossible to effectively repair it when things go wrong.
A house with a modern, simple, and solid construction is best when it comes to maintenance and repairs. One simple way to see if your property is too complex is to count the building’s corners. If your building has the standard four corners, it’s simple and inexpensive to maintain.
7. Choose the right property management company.
If you’re new to renting, the best way to maximize your profits and protect yourself legally is to enlist the services of an established local property management company.
Property management companies can draw up a lease for you, connect you with reliable contractors, and help you choose a property likely to be profitable. It may seem counter intuitive to pay someone to manage your property when you could do it yourself, but in fact, managing a property is difficult and expensive if you’re inexperienced. It’s easy to get in legal and financial trouble without help. Get references and interview different companies to find an experienced, professional company. You’ll find it’s a wise investment.
If you’re looking to buy a property for rental in the Houston area, Green Residential can help. We can help you find the best bargain for your money. Contact us, and you’ll be well on your way to becoming a successful landlord.