The
appeal of income properties and the potential for what may seem like easy money
and early retirement have likely crossed the mind of anyone who has heard of
this business venture. There is a lot
more to consider before entering the income property game, however, than simply
purchasing a property and watching the dollars roll in. Here are a few things to consider before
launching into your new career.
Can You Recognize An Income Property When You See
It?
There are
a lot of features that make a good income property. Whether you are considering flipping it for a
profit or renting it out to potential tenants, knowing what to look for is more
than half the job. Can you realistically
estimate what the cost of renovations to the property will be? Do you know what the value of the home will
be after the renovations, based on its size, location, etc.? Do you know what the market rent would be for
the property? If you can't answer any of
these questions you either have a lot of work to do, or you may want to
reconsider.
Not Scared Off?
So, you
think you can reasonably identify an income property and are still interested
in making your first purchase. Here are
a few tips for making that a success!
Know Your Intent
Whether
it's flipping or renting the property, you should have a clear picture before
you make the purchase. Have an estimate
of what the renovations will cost as well as the profit margin of the
investment, both in the short and long term. Make sure you take into consideration all the
overheads such as landlord insurance, maintenance both yearly (such as pest
extermination and heating & cooling system) and incidental. Take a good look at the equipment and
appliances before you buy a property.
How old are they, what condition are they in and when are they likely to
need replacing? How will you market the
property? Will you need to use a
Realtor® to find tenants? Do you plan on
managing the property yourself, or are you planning to use a property management
company? Are you planning on long term
letting or short-term holiday lets? The
type of property and the location of the property will be determined by your
answers to some of these questions. Make
sure you sit down and come to a decision about your goals before you buy. A 1 bedroom apartment on a busy street may be
ideal as a rental for a long term tenant working in the neighborhood, whereas
it might not be successful as a holiday let. Do your homework!
Consider Splitting the Costs
Many
people who enter the income property market reduce the risk by having
partners. Whether it's a friend,
relative, or business partner, this may be the right decision to minimize your
risk in your first venture.
Make It Your Business
Whether
you plan on doing this as an additional source of income or you are going into
it full time, realizing that this is now a business will prevent you from
losing a fortune. You will spend a lot
of time getting to know both the real estate and the home renovation
industries, and the more you know, the more successful you will be.
Deciding
to get into the income property business can be a time consuming, but
ultimately very rewarding, venture. Like
any business, the effort you put in and the knowledge you have will determine
the success you achieve.
Valerie
McKean GRI, ABR
Owner/Broker
Century 21 Sterling Real Estate
Century 21 Sterling Real Estate
REALTOR®
Tel:
910-430-9494
No comments:
Post a Comment