{"id":9035,"date":"2018-03-28T10:00:48","date_gmt":"2018-03-28T17:00:48","guid":{"rendered":"https:\/\/www.rentecdirect.com\/blog\/?p=9035"},"modified":"2022-06-16T13:50:15","modified_gmt":"2022-06-16T20:50:15","slug":"real-estate-investing-tips","status":"publish","type":"post","link":"https:\/\/www.rentecdirect.com\/blog\/real-estate-investing-tips\/","title":{"rendered":"Purchasing an Investment Property? Consider These Three Tips"},"content":{"rendered":"

\"realIf you\u2019ve ever watched one of the seemingly endless stream of home improvement shows on TV today, you might be thinking of buying a rental property of your own. <\/span><\/p>\n

While there are plenty of ways to make money off a rental, it might not be as easy as what you see on TV. Houses don\u2019t often magically transform from dilapidated to desirable in a matter of weeks, and there\u2019s an inherent amount of risk that goes into any property purchase. But with a little bit of know-how and some hard work you can reap the benefits of being a landlord or success real estate investor!<\/span><\/p>\n

With that said, if you\u2019re planning to buy a property of your own there are more than a few things to consider. If you\u2019re looking at buying a home in the city, be prepared to pay much higher taxes compared to a similar sized home in a more rural area, where taxes tend to be lower. Also, don\u2019t forget to factor in things like <\/span>insurance costs<\/span><\/a>, renovation costs, and if the rental is going to generate a <\/span>positive cash-flow<\/span><\/a>. <\/span><\/p>\n

To help you put everything into perspective, we\u2019ve put together this list of tips and tricks to make your property purchase a little smoother!<\/span><\/p>\n

It\u2019s All About Location<\/span><\/h3>\n

As Lord Harold Samuel once said, real estate is all about \u201clocation, location, location,\u201d and the saying is as true today as it was several decades ago. It\u2019s important to take into account the area you\u2019re looking to buy in and <\/span>what factors may drive prices up or down.<\/span><\/a><\/p>\n

For example, homes in areas near colleges are popular rental areas because there is a steady stream of <\/span>students willing to rent from you<\/span><\/a>. However, there\u2019s also the risk you run by renting to college students who may cause more wear and tear on the property. But homes in less desirable neighborhoods probably won\u2019t command the same rents as those in better areas. <\/span><\/p>\n

To combat this issue, try to gather as much information as you can about the area, where local jobs are going, what the schools and attractions look like, and if the area you\u2019re searching in is slated to see some growth in the future. While a low property price in a rougher part of town might be alluring, having your rental be in a better neighborhood may be much more beneficial in the long run.<\/span><\/p>\n

When looking for a rental, don\u2019t forget to check out the tax information attached to a property as well. Property taxes vary wildly, whether it\u2019s one town over or on the other side of the United States. According to a 2017 <\/span>article by The Motley Fool<\/span><\/a>, the average American homeowner is paying a little more than $2,100 a year in property taxes, but that can all change based on what state you\u2019re buying in, the value of your home and other factors.<\/span><\/p>\n

What Condition Is The Property In?<\/span><\/h3>\n

Some people love the idea of buying a fixer-upper dirt cheap and then remodeling it into the house (or rental) of their dreams, but the truth is there\u2019s a lot more that goes into a home purchase than what you see on television. If you aren\u2019t careful, you could be stepping into a situation where you\u2019re spending more money than you planned to for many unforeseen problems you didn\u2019t even know existed.<\/span><\/p>\n

When buying a rental property, it\u2019s incredibly important to have the home inspected by a professional who can tell you what work needs to be done. According to HomeAdvisor, <\/span>a home inspection will cost about $325<\/span><\/a> on average, though the price may vary depending on the size of the home being inspected. While the additional cost might seem like another hassle at first, a professional inspector can tell you what work needs to be done and even prevent you from taking a bad deal on a house that needs more work than you might anticipate.<\/span><\/p>\n

Once you buy an investment property, the next step is usually fixing it up to make sure it\u2019s <\/span>suitable for a tenant to actually live in<\/span><\/a>. While some homes might only need a new coat of paint, others will require a lot more time and effort. To cut costs and inject a little personal pride into your property, it might be worth it to take on easier projects like painting, yard work and laying down hardwood. Electrical and plumbing projects, along with demolition projects, might best be left to a professional who can do the job safely and efficiently.<\/span><\/p>\n

One benefit of hiring a professional to take care of bigger projects is that they understand how to do it correctly. While it might seem like taking a sledgehammer to your walls and scraping off the awful popcorn ceiling in your new living room is an easy task you can do on your own, therein lies the risk of being a rookie repairman. <\/span><\/p>\n

For example, an experienced home renovator would know that older homes, specifically ones built before the mid-1970s, are likely to contain asbestos, a toxic mineral that can do some pretty serious damage to your lungs if you breathe it in. No level of asbestos exposure is considered safe and the mineral has been<\/span> tied to several awful diseases, including mesothelioma<\/span><\/a> and asbestosis, two incurable diseases with low survival rates. So, at the very least, it\u2019d be a smart idea to bring in a licensed professional to check your home for asbestos-containing materials and determine what you might be able to do yourself and where it\u2019s best to hire someone to do it for you.<\/span><\/p>\n

A professional will also know how to deal with other common problems like <\/span>mold<\/span><\/a>, which grows in damp areas and could alert you to leaks or excess moisture, and lead, which was used in paints and may create toxic dust during renovation. <\/span>
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Is Your Property Worth One Percent?<\/span><\/h3>\n

In the same way seemingly every parent thinks their child is the best, you might think your home is the best deal on the block. The space has nice fixtures, new appliances and even a front porch for nights when your renter might want to sit outside and relax. But even with all of these seemingly attractive features, does your rental property pass the one percent test? For those who don\u2019t know, <\/span>the one percent rule is pretty simple<\/span><\/a>. You simply multiply the selling price of the home by one percent, and the amount you get is a baseline of what your rent should be to break even.<\/span><\/p>\n

Granted, the one percent test only takes into account the price of the home and doesn\u2019t include <\/span>things like taxes, scheduled and unscheduled upkeep and insurance<\/span> on the property. However, this does allow investors to at least break even on the rental itself and avoid losing money there. <\/span><\/p>\n

Homes in nicer neighborhoods where the area is on a positive trend are likely to have an easier time passing the test than homes in less desirable neighborhoods and areas where demand, and likely rents, might be lower.<\/span><\/p>\n

Insurance is also an issue new property owners will have to contend with. If you\u2019re using the rental property for a long-term rental, you will need to purchase <\/span>a landlord policy<\/span><\/a>. It\u2019s a little more expensive than standard home insurance, but it protects the property in the case of physical damage and covers equipment left on-site that you or the tenant need to use, like appliances and home maintenance items. It\u2019s also suggested that any tenants renting the property buy <\/span>renter\u2019s insurance<\/span><\/a>, so that they\u2019ll be covered if their items are damaged.<\/span><\/p>\n

Onto New Adventures<\/span><\/h3>\n

Owning a rental property is a unique and exciting adventure, but it does take a lot of work to get everything off the ground. However, if you can find the right location at the right price, make the home as inviting and safe as possible and pass the one percent test, you\u2019ll be well on your way to making money in real estate!<\/span><\/p>\n

-This information was provided by <\/span>Mesothelioma + Asbestos Awareness Center.<\/span><\/a><\/em><\/p>\n

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