Are You Ready for an Investment Property?
Investing your money can be a nerve wracking decision. You face many options, and so much stress about what the future holds.
Perhaps you have been considering an investment property, but are uncertain what to look for. What matters most to your bottom line?
If you are looking to secure a steady income from your investment, here are a few considerations before you buy:
Location: Are you going to manage the property yourself or hire someone to oversee the needs of tenants and upkeep? If you are doing this yourself, you will want it near enough to your own home that it will be an easy trip to go and take care of a sudden issue or repair.
Neighborhood Success: The quality of the neighborhood in which you buy will influence the types of tenants you attract (families vs. college students- one has staying power the other probably leaves for summer). You also want to buy in a growing area not one that has residents exiting. Ask yourself if there are an unusual number of rentals available? Why is this occurring? Are businesses successful in the area? Also, take a look at the records for crime in the neighborhood; vandalism rates, serious crimes, petty crimes and recent activity. Do police get called to this neighborhood a lot?
The Tax Rate: A higher tax rate may not be a bad thing in terms of the community and quality of neighborhood- they will probably be good. But it will cut away your profits if you are not careful about price and what you can fairly charge for rent. Do the math! Find out what the average rent is for similar properties in the neighborhood. If charging the average rent is not going to be enough to cover your taxes (any mortgage you take out) and other expenses, then keep looking.
Demand from Potential Tenants: Is there a demand for rental property here? Will you easily fill vacancies? Locations with growing employment opportunities tend to attract more people and that equates to more tenants. To find out how a particular area rates, go directly to the S. Bureau of Labor Statistics or to your local library.
- Start small: Do not take on too much property or a fixer-upper if this is your first investment property and you lack the skills or capital to support it. While repairs present a challenge, so can buying a bigger property than you're equipped to handle. By starting small, like buying a single apartment, condo or duplex, it can help you get started with investing in real estate, but limit the demands it puts on you. This allows you to make an educated decision to take on more, to choose to go bigger (an apartment building or complex) or even invest in commercial property.
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