A Long-Term Investment
Real estate has the potential to be an amazing long-term investment that goes beyond traditional assets. Though it can produce satisfactory returns, real estate investment requires dedication, research, and planning. Before you jump in and purchase your property, take a moment to consider these seven tips we have gathered for new real estate investors.
1. Know the Costs
Any investment comes with a large financial commitment, and real estate is no exception. Buying a property requires a large down payment upfront, but there are more costs to keep in mind. In addition to renovations and preparation for the property to be inhabited by tenants, you must also consider basic maintenance, yearly upkeep, upgrades, furniture, appliances, utilities, and property taxes.
2. Select the Property Type
Once you have determined the affordability of property investment, and gotten your finances in order, you must then decide the type of property you will choose to invest in. If you purchase a property for residential purposes, you can become a landlord for long-term homes or apartment rentals. Another residential option is investing in a home that is used for short-term rentals, such as a vacation home or Airbnb. If you are not interested in investing in a residential property, consider purchasing a building that businesses can rent for commercial purposes. If you want to skip dealing with tenants altogether, you may opt to purchase, flip, and sell a property for a quick return.
3. Select the Area
In addition to the property type, the location of your investment can play a large role in your investment’s success. First, consider the purpose of your property; if your goal is to have a residential or vacation property, think about its proximity to entertainment, shopping stores, and schools. If you want to go the commercial route, make sure to analyze the population, parking availability, and demographics of the area. It is also pertinent to check and compare the market value of your desired property and the surrounding properties. Research rentals that could serve as your competition, and pay attention to their selling points and rental price.
4. Decide the Terms
Once you have decided the type of property and the investment, you must then decide the terms of agreement for individuals who rent your property. These terms include the price of rent, fees, yearly costs, and emergency funds. When deciding the terms, consider the funds you need to maintain the quality of the property, how many potential tenants in the area are willing to pay, and the terms of surrounding properties. You may want to consider hiring a property manager to ensure your investment and finances are well taken care of, especially if you plan on purchasing more than one property.
5. Protect Yourself
Making any property investment comes with a risk, so it is important to protect yourself and your assets. For this reason, consider using a limited liability company (LLC) to purchase one or more investment properties. When you do this, the LLC has ownership over the properties; if something goes wrong, you will not be held personally liable.
6. Keep Growth in Mind
While your property will likely serve as a long-term investment, you may want to eventually sell it. No matter the reason for putting it back on the market, you will want to attain a profit. To make sure this happens, build your property’s value and make it appealing to buyers by making simple upgrades or additions. As you continue to make improvements, your property’s value will increase, and your hard work will pay off when the time comes to sell.
7. Keep Numbers on Hand
Being prepared for every situation is important when managing your property. For this reason, keep a list of phone numbers of people that can readily assist you with your investment. This list should include property managers, an attorney, real estate professionals, and lenders. To be sure your property is well-taken care of in the event of a maintenance emergency, also include a list of plumbers, electricians, inspectors, pest control experts, handymen, and contractors.
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