Investment properties can seem complicated. But with the right expertise and knowledge, real estate investing can be an excellent way to diversify your investment portfolio. Here are some things to consider:
Do your homework. Take time to map out your personal financial goals. Short-term goals versus long-term goals will determine the right strategy. If you are interested in flipping properties, be aware that this is a riskier. This requires a more intense approach utilizing more resources and time. Desiring a steady rental income means a steady cash-flow. It’s essential to find properties in good rental markets. Buying and holding on to investments means more on-going maintenance and administrative management of renters.
Connect with an expert. Doing research is okay. Ultimately, it’s a good idea to connect with a real estate expert. Though it’s tempting to try to manage things on your own, never underestimate the value of an expert. Whether researching what is available on the market or which areas yield the best market rental rates, a good realtor can save you a lot of effort and time. And time is money. Additionally, realtors are usually well networked. This means that they can provide many useful contacts including inspectors, appraisers and contractors to help manage various aspects of making a wise investment.
Evaluate your financing needs and cash flow. Although cash is the most obvious answer, it is possible to finance an investment property. Different loan products are available for different needs. Additionally, there are other options such as partnering with another investor or investing in a real estate investment trust. Ultimately, it will depend on your financial goals and what you are able to invest in terms of financial and sweat equity. From purchase price to costs of fixing up or maintaining the property, it’s important to evaluate your return on investment needs with your lender and your CPA or CFP.
Jack-of-all-trades or master of none? Rental properties require maintenance and the ability to manage renters. Ask yourself, do you have the mentality and time to handle these demands. Do you want to handle a 3:00 AM plumbing emergency? Property managers can not only field these emergencies for you, they help you find solid tenants and manage a myriad of other property administrative tasks like collecting rent! Typically, property management fees are a percentage of your rental income. Totally worth it if you don’t have a lot of time.
Keep emotions in check. Real estate investment can be exciting but it’s important to not get overly emotional when making a purchase. A house that you love in a neighborhood in which you live may not be a great investment if the market conditions cannot yield your cash flow return goals. Additionally, think with a “livable” mentality. A clean and functional rental with the right rental rate is better than an overpriced luxury rental with no renter.
There are many other aspects to owning and managing investment properties. Properly preparing yourself regarding the ins and outs of investment properties will be the most important investment you can make in helping to make in real estate investing a lucrative part of your investment portfolio. If you have questions or would like to begin exploring our investment property loan options, connect with me today.