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Helpful Tips 6. Want to Invest in
Real Estate But Not Live In It?
Turn on any financial news program and at some point you'll
hear the experts extolling the virtues of diversification.
Real estate has long been considered a conservative,
long-term strategy to growing wealth. While some seasoned
real estate investors make it look easy, to be successful,
beginners should follow some basic principles.
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Learn
all you can. Consider attending a seminar or talking
with individuals who are experienced in real estate
investing. If you don't know anyone in your area, check
out the National Real Estate Investors Association's
website: www.nationalreia.com or www.mrlandlord.com.
Before committing your cash, you should have a
fundamental understanding of real estate. For example,
be aware that, in general, investment properties are not
liquid investments. Barring exceptional circumstances,
real estate does not sell at a moment's notice. It could
take days or months to sell a property, depending on the
strength of the market in a particular region.
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What
are your financial goals? It is possible to make a lot
of money. However, you need to determine how hard you
are going to work to do it, and how long you intend to
keep each property. With each investment unit, you'll
need to take into account cash flow, appreciation,
equity, and depreciation. Talk with your accountant
about tax liabilities and benefits.
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Consider cash flow. You'll need to have enough capital
on hand to cover any short-term losses due to vacancies
between tenants, repairs, property management, taxes,
mortgage, etc.
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Start
small. Look into buying a single family home or a
duplex. Leave large apartment buildings and commercial
properties to the pros.
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Inquire at the local Chamber of Commerce about companies
relocating into or out of the area. Company movement is
one indicator of demand for rental and/or office space.
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Find
a property that will be in demand when you are ready to
resell. Look for a moderately priced home on a quiet
street with three or four bedrooms, two bathrooms, and a
garage.
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Research the property. The most common way first-time
investors lose is by failing to investigate a property
thoroughly. Look beyond the front door. Investigate the
reputation of the school district, the crime rate, and
plans for expanding a nearby highway or developing
vacant land. Ask a local real estate professional about
the area, its history, and how fast (or slowly)
properties are moving. Find out the tenant demand in
that market.
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Inspect the home you're considering for signs of water
damage, such as stains on the ceiling and crinkling or
gathering wallpaper; open and close every door and
window; and check all electrical sockets by plugging in
an appliance. Get an independent home inspection, roof
inspection and termite inspection. Unexpected repair
costs can eat away resale profit. Because even the best
inspection can't always predict problems, try to set
aside some of the rental income for unexpected repairs.
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Spend
time driving the streets of the community noting the
condition of other properties. Are lawns maintained? Are
roofs in good shape? Are homes kept up?
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Be
ready to make fixes quickly and respond to the renter's
needs. If you're not prepared to be a hands-on landlord,
consider hiring a property management firm.
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Find
a real estate professional who has experience in
investment properties in your market. They can pass on
valuable information about rental prices in your market
and the sale prices of other rental properties in the
community.
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