This weeks real estate investment blog is about preparation. When you first step in to the exciting world of chances are you haven’t run a cost/value comparison, comparative rental market value report, or anything else with a big name and the word “report” at the end. Don’t worry, we will get there! When pursuing a new investment opportunity, you can’t research enough! The more time you put into early preparation, the more ready you’ll be when a property becomes available. There are several things to consider while preparing to invest in real estate.
Cash on Hand. How much money do you have available for the down payment? Unlike when you purchased your first home (typically with government help), investment property loans have stricter requirements, higher interest rates, and more down payment money. Typically you will be looking at a minimum of 25% for an investment property down payment. There are several ways to help generate this needed cash (ira funding, equity back loans, etc.) that can be financially beneficial depending on your current portfolio’s status. You will want to get 25% to avoid the slew of fees for only achieving 20%. Just avoid it altogether, the lender will tack on so many fees it will end up costing you virtually the same! Don’t do it!
Finding the Right Property. Chances are if this is your first investment property, you will be stretching your budget to buy the property. We all started there and you should be proud to be able to invest! When you start looking for the perfect property, keep in mind your own budget. The property needs to work within the confines of your budget and expense funds. DON’T OVERSTRETCH. You will be able to buy additional properties in the future, don’t break your back on the first one! Careful preparation, cash down, and an affordable payment will make the property work for you! Our job is finding the right property. Don’t rush it.
Cost of Ownership. After the inspection comes back, and the property is in the most pristine condition of any recorded history, it will still have issues! Its a guarantee of ownership: you will have to fix broken stuff. The good news is most repairs will fall under about 10% of the yearly rent. That includes incidentals, taxes, and tenant move-out related costs. If something bigger needs repair, you will want to ensure you have a cash reserve available for the property repairs. If the investment property passed inspection, you should be safe with just a few thousand dollars, but its best to keep your CoO expenses in mind!
Ignore the Hype of Flipping. The time for flipping real estate is passed. Nowadays, real estate is rapidly appreciating in value and there are no legitimate flipping opportunities. When looking into real estate investing, know your going to own the property for the long term. This will change your focus points and what you’re hoping to get from the property. It will also help you commit to the long term. Real estate investing is not a get rich quick scheme, its all about long term steady growth. Ignore the TV shows, and settle in for the long term.
After finalizing the financial basics the next step will be the application! We will go over that next week! See you soon!
Welcome back! This week’s buying rental property part 2, we will cover some information about the property purchases. Our first blog covered some of the things to consider before investing. Before you buy you need to know a bit about the property! Personally, I use a checklist of things to check before investing, ensuring I don’t miss any important details. There are a ton of State and Federal laws that govern real estate investment and properties. Without making it a point, your Realtor is a vital resource and will keep you from a potential hazardous deal! If you aren’t working with a real estate agent, be incredibly careful when looking at investment properties. It really is a field where we earn our commission!
Looking for the “deal.” For the most part, you get what you pay for when buying rental property! “Deals” don’t typically exist and there are many variations of properties that increase (or decrease) the value! Lets just create a small example: You purchase a new rental that was built 40 years ago. Good price, nice area, its a pretty good deal and your excited to start making money! A home built in the 70’s, will not be up to current code and you will need to make some adjustments! You need an inspection, peep holes in the front door, a dead bolt, reinforced front and back doors, etc. The above needed repairs are almost never updated and will cost around a thousand dollars. And that is just a simple home! Buying rental property isn’t a horror story, but you need to know some of the repairs/upgrades you will need to add to the property! You can email me for a list of things to check as well!
More detail repairs. Most rental properties that you will look at need some form of repairs. Because of the competitiveness of the current market, it will be hard to get the seller to pay for any needed repairs! When you’re doing a home walk through, take note of potential repairs you will need to make. Does the home need a new water heater? Are the appliances very dated? Will the walls need repainted? Knowing the general costs to install typical appliances will help you stay out of trouble when buying rental property!
Don’t forget about your taxes! We all love paying property taxes every year! When looking at different rental properties make sure you check the property tax costs! While typically not unreasonable, sometimes the taxes will need to be reevaluated, and your home owners insurance will change rates depending on taxed value! The property tax will be included with your real estate packet, and if your on your own you can request one.
Most of the things you need to check for a rental property purchase are experience based. Make sure your Realtor is experienced with real estate investment, and they will take care of all the reporting and “checks!”
Buying investment property is one of the most secure investments available. At CDA Real Estate Investment & Property Management we strive to provide our clients with the latest and best information available. The rental market (and in turn, investment) is exploding all around Coeur d’Alene! Our rents across the board have increased at least 15% making a great investment market! The market (as a whole) is rapidly trending upwards as mortgage rates stay low, and more renters move to the area. There won’t be a better market to buy in to, as geographical reports indicate Coeur d’Alene is ready for extreme growth.
Have you Considered Buying Investment Property?
Many people have questions about investing, and never take the time to ask! How much does a house cost? How much money do I need down? How do I manage my renters? These kinds of questions all have easy answers. The most important thing to understand is how easy it is to purchase an investment property! The delays/uncertainty/fear shouldn’t stop you from missing a great investment opportunity! Real estate is one of the most secure expenditures of investment money available. While all investments carry risk, real estate investing provides a steady almost risk free way to build wealth. In Coeur d’Alene our market is increasing on a steady value curve, generating at least 4% YoY and that number is climbing. I have owned rental property for years and have never seen anything like it! If you are considering buying property, briefly consider:
Asking a Investment Realtor for help. I am one of the best agent investors in Coeur d’Alene. By owning a property management company, it allows me to see a different and unique side of real estate most agents miss out on! I can show you how profitable buying investment property can be by showing you my own properties!
Do some Research. The internet is chock full of helpful resources for buying investment property. Most (not all!) of the investment guides you read can provide practical information about down payments, typical rents, and value curves. When you get more prepared to invest, we can get specific data on available rental houses. Some self research will help familiarize you with the purchasing processes.
Don’t be afraid. The big one! Tons of people consider buying investment property, but never take that next step! Don’t be scared, you have an advocate that will help walk you through the process! In the following weeks we will go over specific information about buying investment property. If you have any questions, please feel free to email me! I’m always available and love helping investors make money!
Thinking about buying rental property? I’ve found that most people look to real estate investing as something to do “in the future, when we aren’t poor” or “a nice dream but not really practical.”
In actually, mortgage rates have been low enough in recent years that almost anyone could start looking towards real estate investing. Lower mortgage rates, and higher rental rates typically signal a good time to buy! I have found a couple helpful tips when you are considering buying rental property.
Find a trusted agent. Not all real estate agents are created equal! Just like in any other field, Realtors often focus on different fields of real estate. You want to make sure and work with an experienced Investment Realtor. Starting off with an expert will help you learn more about buying rental property and you can avoid common mistakes that will cost you more money. An investment Realtor can also connect you with a reputed property manager and help you find quality renters. Trust me, don’t skip this step! Feel free to ask me any questions as well, I have done tons of investment deals and come highly recommended. You can email me here.
Expect the unexpected. When looking into buying rental property, you can’t be prepared enough for the unexpected. Repairs, problems, and emergencies never happen on weekdays! Most issues that come up will be resolved by your property manager (as long as you hire one) but if your self managing, be prepared for a few inconvenient problems!
Finding good tenants is the secret to property management success. It can’t be stated enough! If you have a high quality family in your home, your real estate investment will be a dream! Your Realtor, and the local property managers will be able to help you find a great tenant. Just avoid any potential problem tenants, they are more trouble then their worth!
Being a Landlord is not for the faint of heart. I’m going to be really honest here. Real Estate investment and property management are not for people scared of bad hours or risk. It takes a lot of gumption to manage your rental home, however the profit potential and property value increases make it worth it! I personally have yet to lose money on a property deal, and this rings true for my clients as well.
In following weeks we will add to this series, since knowledge is power. While your thinking of investing continue to do your research, and when you’re ready to take the next step give me a call!
Real Estate Investing is a tricky business. The most common concern I hear from people is how to start. While you can get a ton of advice to answer that question, I’ve found the best system is just keep it practical. The first thing you will need is a reliable realtor. If your an investor your time is spent managing your money, not finding properties. Realtors (should be) experts on the local market, and also have access to pre MLS listings. This makes them a very valuable resource when finding properties to purchase. If you don’t currently work with an Investment Realtor, give me a call. I am a realtor and the partial reason is more exposure to investment properties!
Amount the first things you need is determination. When you decide to start investing, then do it! Oftentimes in life we stumble across a great idea and then struggle to follow through. Real Estate Investing is an amazing investment growth market so follow through! I’ve personally found that being accountable to multiple people is very motivational. If you have your Realtor looking for the right property, and your accountant’s blessing on the funds, it keeps you moving towards the path of investing.
Once you have found an investment Realtor, your accountant gives you the thumbs up, and you’re determined to move forward, you need to find a bank. The bank you choose will work in tandem with your realtor to provide expert advice on the properties your hoping to invest in. The bank can also alert you to potential mortgage rate changes and help find the best way to submit for a loan. The more help the merrier!
Today’s last tip is really simple: look for better return rates! Often overlooked this should be a no-brainer. Most Realtors and investors will tell you to aim for a 1% return. It is possible to get much higher returns in our current market you just need to look for the right deal! With enough people in your pocket it will be easy to find a higher return rate on a local home.
These few tips will really help you begin the journey. In the coming weeks I will add to this column the more intricate aspects of Real Estate Investing. No matter where you start keep excited! Real Estate Investing is fun and can be extremely profitable if you do it right!