Most people would greatly benefit from including real estate investing as a component of their overall investment strategy. As a licensed real estate salesperson, for more than a decade, I have identified several opportunities, both for my clients and my own personal investment portfolio, and I believe when this is done in a smart and knowledgeable way. , it is extremely beneficial. With that in mind, this article will attempt to briefly examine, discuss and review 8 significant and relevant factors, to consider and pay attention to determining which possibilities make the most sense, from an investment perspective.
1. Purchase price: Know your budget and personal limitations. Remember, financing non-owner-occupied properties is generally more difficult and a bit more expensive. Most lenders examine rental listings to see if investing makes sense. Be careful to buy what you are comfortable with!
2. Real estate taxes: When calculating the return on investment, or KINGDon’t forget to consider the costs of property taxes (and recognize, these generally go up, every year).
3. Monthly transport costs: Take into account all the ingredients related to your total monthly transport costs! This includes: mortgage-related costs (interest, principal, security deposit), taxes, utilities, reserves for maintenance and repairs, etc.
Four. Condition / top – maintain: Examine the general condition of the prospective property. What could require immediate attention and how much could it cost? What do you envision the annual maintenance to be and whatever? Remember, if you don’t need anything, you will probably pay more to buy it, so factor in your total costs!
5. Repairs Needed: What might be needed immediately, to fix and / or repair, to avoid major problems / challenges in the future? Distinguish between required and optional repairs, and create a realistic schedule and timeline, with costs determined!
6. Necessary renewals: When looking at investment properties, use a different mindset than your personal residence. Always consider the pros, needs, and costs of renovations, and consider multiple options, including trade-offs.
7. Potential income – roll; Return of investment (KING): Examine the current rent, as well as the potential, if you do certain renovations, etc. This return on investment, or ROI, is essential to make the right decisions with this type of property. However, avoid overestimating your income and estimate conservatively. Aim for a 6% return, which means getting at least a 6% annual return on your investment, which includes the original purchase cost and planned renovations and repairs in the first two to three years. Also, look for a positive cash flow scenario, where income received exceeds monthly expenses. In addition, base income on only 10 months of income, counting all expenses, to position yourself, in case of vacancies and / or deliveries.
8. How easy to rent: Consider the local area and determine if it should be easy enough to rent units due to demand, convenience, etc.!
Investment properties often make large investments, but only when they are done wisely, carefully, and prepared. Follow these 8 steps to be better prepared!