Investing In Residential Properties
It seems that we get asked almost weekly about what the best way is to begin investing in residential real estate properties. With so many potential investors unsure of the ins and outs and, namely how to just get started in their real estate investing career, we thought it would be a good idea for us to give you the 411.
Let’s begin with timing. This is crucial as it is harder to enter the real estate investing world when real estate is priced high and interest rates are soaring. Now is a good time to enter because the real estate market, as a whole, has stabilized since the housing crisis back in 2008. And, while interest rates hit a low point last year, they still remain low today in comparison to past times.
Consider different financing options. As an investment property, it doesn’t always have to be a traditional bank loan. Many borrowers are able to find a better deal at a local neighborhood bank as opposed to a large national bank. Look into owner financing or other possibilities such as a hard money lender if you are planning on doing a quick flip (we use hard money lenders frequently for our flips). Make sure that you review all of your options to decide what is best for you and your individual situation. It is important to be a ‘strong borrower’ meaning that you should have your financial house in order which includes reserves in the bank and a good (to excellent) credit score rating. Also, you should take into account the Loan-to-Value (LTV) ratio which different lenders have varying policies.
For a rental property, account for vacancy. While it’s nice to collect the rent each and every month like clockwork, it doesn’t always happen. So make sure that you have a plan in place should your investment be vacant for a month or more as you will still have mortgage payments to make as well as other additional expenses.
Make sure the numbers add up for cash flow. The worst scenario is to go all in on a property only to find out that it doesn’t have the type of return that you believed it to have. Take your time and do your homework to ensure that all of the numbers work. Obviously, you want to have a positive number coming in each month. Some of the expenses that go along with having an investment property are mortgage payments, replacement reserves, property taxes, repairs and insurance.
Join a couple local real estate investment clubs. Make a few friends and ask questions. People will love to talk about these successes and pitfalls. You will also get leads on good contractors, attorneys, accountants and other professionals to be part of your team. You will also get leads on deals in your area from other investors who may not work that far from their homes.
Is Real Estate Investing for You?
While 89 percent of Americans are non-investors, 3 percent (or 28.1 million) Americans are real estate investors. Based upon research conducted so far in 2014, real estate investors believe that strong rents will remain, prices will continue to rise and values on properties purchased today will continue to increase. While virtually no type of investing is risk-free, real estate does have less risk involved than other investment opportunities not to mention the potential to have a higher return on your money.
Here’s the bottom line
Real estate presents a terrific investment opportunity (when done right) and can generate great returns. Contact our company to learn more about how we can help you find the perfect real estate investment.
Sell Your Boston HomeInvesting In Residential Properties