(PRWEB) May 25, 2012
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.
What’s more, the real-estate market is starting to recover: U.S. houses lost $ 489 billion in value during the first 11 months of 2009, but that was significantly lower than the $ 3.6 trillion lost during 2008, according to real-estate website Zillow.com.
“We haven’t seen home prices this low in so many years, coupled with the rates being so low,” says Warren Gold of Tampa Florida , an inverstor in the Tampa Bay area for years who specializes in investment properties. “When the money is cheap to borrow and the houses are cheap to buy, it’s absolutely the best time to invest.”
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 all options. Since not all investment properties are the same, it’s important to determine what type of property fits your strategy, says Gold . Becoming a landlord, or would restoring and reselling properties? being interested in apartment buildings and other commercial real estate, or in buying land that can be developed? First-time real-estate investors may want to start with residential housing, since commercial real estate and land development still face challenging market conditions.
Partner with experience. First-time investors should find a real-estate agent experienced in investment property deals who can help you locate promising properties. “Look for relational brokers who expect to do business and will be much more careful with what they recommend,” Gold says. A second option is to collaborate with a more experienced real-estate investor and close a deal together. In this economy, an experienced real-estate investor may be willing to work in exchange for the capital ,Gold says.
Go down to the general district court house and listen to some landlord/tenant cases and get a sense of what kind of challenges landlords face,
Look for the right location. Buying a property with hopes of renting it out, location is key. Homes in high-rent or highly populated areas are ideal; stay away from rural areas where there are fewer people and a small pool of potential renters, Gold suggests. Also, look for homes with multiple bedrooms and bathrooms in neighborhoods that have a low crime rate. “Renters gravitate to a safe neighborhood, and if they have kids, they will want a good school district,” Gold says. Also think about potential selling points in the property. If it’s near public transportation, shopping malls or other amenities, it will attract renters, as well as potential buyers.
Have capital lined up. Speak to potential lenders or even a financial planner about the ups and downs that could come with investing. When renting out the property, count on paying the mortgage whenever there’s a vacancy. “Allow about six months of mortgage payments saved up, it’s there if you need it, and use that money for repairs,” Gold says. Even if in planning to fix up a home and sell it,Plan on holding it for several months in the current market, Gold adds.
Build a supporting cast. Don’t wait until a rental property needs repairs to find someone to handle them. “Line up maintenance individuals who can take care of the different challenges that occur so when a particular issue comes up,” Gold says. Other sources is to have relationships 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. The more support , the better to handle the problems.
Make sure you understand that buying investment property is an entirely different experience than buying a primary residence. “When buying a home, usually their is emotions in it,” Gold of Tampa says. “When buying an investment property, Put all that aside and ask, ‘What makes sense?’”