Even with all the buzz in the market it is important to know the differences between investing in single family homes or plexes and how minor change in location can impact your potential cash-flow.
While rents are strong, some properties do not cash flow (income is great than expenses) right away so it is important determine what your goals are before you start making offers on property.
We are seeing a large amount of 1031 exchanges which can be attributed not only to an improved housing market, but also out of state investors looking to maximize their buying power.
The most important thing to keep in mind as an investor is that you make your money or profit when you buy. Sounds odd right? What I mean by this is that a good deal is just that, it is an opportunity that you have vetted and are able to determine if what you have learned is in alignment with your goals.
Some important questions to ask yourself are:
- Is this a long term buy and hold or is this a short term purchase?
- Will I live in the property one day?
- Is appreciation more important or is cash-flow?
- Do I have money to handle repairs?
- How important are tax benefits and do they apply?
- Why type of property do I want? High End or Economy?
Another critical part of the process is making sure you are not only financially prepared for being a landlord, but also emotionally prepared as well. A rental property is not your primary residence, improvements should be based on returns, not necessarily what you would personally want.
While being a responsible landlord is critical, being a landlord means you are in the landlord business and without good judgment, you may not be in business long or may be unable to care for the property as you hoped.
Don’t get too attached, be careful and make plan.
Once you have determined what you want and how to plan to get it, you need to decide who is going to manage your property.
Will you manage your property or will you hire a professional company?
Like anything, managing property is a skill set and can be learned, but do you have the time or energy to do so? If so, great, we can provide you some wonderful resources. If you don’t want to manage your own property we recommend visiting our property management section of the website.