Know what to look for
While the investment game is never a sure thing, one of the most solid investments a person can make is real estate. As the old saying goes, “God’s not making any more land, so the price is only going to go up.”
But if the real estate game were that easy, everyone would be a millionaire. Because of the expensive nature of real estate and the uneasiness many people feel when they decide to invest in it, consider the following tips before taking the plunge.
• Look for the right location. It’s always important to remember that buying an investment property isn’t the same as buying a home you’re going to live in. But some of the same rules apply. One such rule is location. While those looking for their own home will likely look at privacy, the local school system and other things, when buying an investment property it’s best to look in a high traffic area that’s close to public transportation. The high traffic means more prospective renters will see your “For Rent” signs, while accessibility to public transportation will increase your pool of potential tenants.
In addition, it goes without saying that a desirable locale can often rent a place on its own. Rental properties in trendy neighborhoods often rent the fastest and landlords can often charge more for less.
• Look for low-maintenance properties. These days, the practice of “flipping” houses is more popular than ever before. Those who are just starting out investing in real estate, however, should avoid this approach and all high- maintenance properties. Flipping a house requires substantial capital to turn a profit, as you’ll need to do lots of maintenance before you can rent or sell the property. If you’re just beginning to invest in real estate, you’ll want a low-maintenance property that will begin turning a profit more quickly than a property that will need lots of repairs.
• Inquire about the property’s rental history. If you’re buying a property with multiple apartments, examine the property’s rental history. If the current tenants are good with their payments, this will ease your transition to becoming a landlord. If current and past tenants were consistently late paying rent, this might tell you something not only about those tenants, but the neighborhood as well. Good neighborhoods don’t need to beg for tenants, and therefore landlords don’t have to put up with tenants who don’t pay on time. If the property has a history of tenants who pay late, this might be indicative of a neighborhood where people don’t want to live, and therefore landlords might have to accept less desirable tenants who cannot pay on time.
• Speak with local officials about codes and zoning. Landlords who have owned a property for several years often get away with things that new landlords won’t get away with. This can include problems with zoning or fire codes. Be sure to ask local officials about a property before signing on the dotted line.
• Look for a newer building. Particularly for first-time investors, it’s always best to look for a newer building. While an exact age is arbitrary, try and find a building that’s less than 30 years old. Older buildings require more maintenance, and if you’re new to real estate, you might not be skilled at maintenance yourself of know of a qualified handyman to act as your super. Plus, older buildings, while they often have more character, are less desirable to prospective tenants and are often harder to fill than newer buildings.
• Look for sellers who aren’t in-state. A big part of buying real estate, whether it’s property you plan to live in or rent out, is negotiating. When buying an investment property, you can often gain the upper hand if you’re buying a property from an owner who doesn’t live in the state where the property is located. Such owners often prefer selling quickly and minimizing headaches over getting the best price.
On the lookout: newer buildings.
Those new to the real estate investment game would be wise to look for