Investment Property Buyer
If you are thinking about investing in a rental property, experts say low home prices combined with low interest rates make this the best time in years to become a real-estate investor.
There are five main reasons why investors choose real estate investments:
- Cash flow.
- Debt reduction and equity build-up.
- Tax benefits
Unlike in any other businesses, Residential Income Property investments offer profit in multiple ways:
- Appreciation of the property.
- These investments work for the investor 24 hours a day, seven days, 365 days a year, with no vacations, no holidays and no sick days.
- A good economy versus a bad economy does not affect rent due dates.
Rent payments that generate a steady stream of income that overtime becomes residual income. Simply put, this is like an actor receiving residual income from television show reruns.
The top ten reasons why investing properly in Residential Income Properties is a smart way to increase one’s financial wealth are as follows:
- The population is increasing at an exponential rate.
- The supply of land for residential real estate construction is limited.
- Inflation causes a rise in land value.
- Inflation causes a rise in rent.
- As rents increase, property values increase.
- The average annual price increase of real estate in the United States from 1968 through 2004 has been 6.4% (Realtor.org).
- Residential Income Property investments have led all other commercial real estate asset types, for total return over the past twenty years (National Council of Real Estate Investment Fiduciaries, NCREIF).
- Real estate investing offers unique tax shelter benefits unrealized in other industries.
- Real estate offers the highest leveraged use of all types of investments.
- Real estate investing is relatively easy and highly lucrative.
While the timing may be right, these five tips can help first-time investors take advantage of what might be the opportunity of a lifetime.
Know your options.
Since not all investment properties are the same, it is important to determine what type of property fits your strategy. Do you want to become a landlord, or would you rather restore and resell properties? Are you interested in apartment buildings and other commercial real estate, or in buying land to develop? First-time real-estate investors may want to start with residential housing, since commercial real estate and land development can face more challenging market conditions.
Partner with experience.
First-time investors should find a real-estate agent experienced in investment property deals to help you locate promising properties. Looking for relational brokers who expect to do business with you again and therefore are going to be much more careful with what they recommend is what Modern Property Groups encourages. We have a list of suggested reading of you are just getting started with investment properties. Also, we would encourage you to contact us for a Q and A session with one of our Owners.
Look for the right location.
If you buy a property with hopes of renting it out, location is always key. Homes in high-rent or highly populated areas are ideal. You will want to refer back to your strategy and think through what types of renters or properties you will want to deal with in the long run. Also think about potential selling points for your property. If it’s near public transportation, shopping malls or other amenities, it will attract renters, as well as potential buyers if you decide to sell later. The more you have to offer, the more likely you are to please potential renters.
Have capital lined up.
Speak to potential lenders or even a financial planner about whether you have enough assets to handle the ups and downs that could come with investing. Even if you plan to rent out the property, count on paying the mortgage whenever there’s a vacancy. Modern Property Groups would recommend that you can have about six months of mortgage payments saved up. That might not be the case for all property owners, but it is there if you need it, and you can use that money for repairs or unforeseen issues.
Build a supporting cast.
Some important relationships that you may want to have in place are with an attorney to consult with on tenant issues, a property management firm to handle the day-to-day rental affairs and an accountant to help you understand the tax ramifications of investing and a “go-to” guy for repairs and maintenance. Don not wait until a rental property needs repairs to find someone to handle them. The more support you have, the better you will be able to handle the problems that come your way.
Whatever you do, understand that buying investment property is an entirely different experience than buying your primary residence.