4 Investment Property Tips: Plan AheadPosted by Robert Sabrkhani on Wednesday, May 18th, 2011 at 12:30am.
If you're planning on purchasing investment property, you're in great company because that's why many realtors have started their career in the real estate industry, myself included. Don't let this list scare you, because I will help you understand the investment you're about to make.
many much as 25% of all real estate sold is a purchase for investment
purposes. If you're planning to "flip" a property however, there are at
least 4 quick things (there are others, but that's more than one
article) you need to be extremely cautious of that could ruin your real
estate mogul fantasy.
1. Budget Your Renovation Expenses.
You may have purchased your "handy man special" at a discount rate, but make sure you can follow through on what needs to be done, or you have a trusted partner that can help. I say trusted partner, because most vendors that you don't already have a relationship with and trust probably won't cut it a true "fixer upper" situation where you need help in many trades (electrical, plubming, carpentry, etc). Even if the property was in great shape you should never skip this step, because homes almost never come exactly as required.
As soon as your
venture is complete, will you be capable of recovering your expenses?
Make a revenue especially if the worth of your renovated property is
above those in your neighborhood? In addition, are you able to stand up
to a correction in actual property values?
2. Plan Your Financing and Insurance Costs
You will have topay your monthly mortgage payments while the project goes on. You'll also be responsible for homeowners insurance even if you don't occupy the residence and you've got tenants. If your investment property isn't your primary residence and you're not paying cash - you're gauranteed to pay a higher interest rate - and the mortgage is harder to get approved.
3. Rentals Can & Do Have Inherent Issues You Must Fully Consider
Understand the basic supply and demand for your investment's area. A market saturated with rentals and low price alternatives will mean that the rents you may charge might be less than what you had hoped to receive. In some markets you are required to get particular licensing with a purpose to be a landlord. In different markets the authorized rights of tenants imply you could possibly have a prolonged and expensive battle in ridding yourself of a non-paying tennant.
If you're handy, you can minimize your rental risks [and expenditures] by doing the majority of the upgrades or repairs yourself, but know your limits. Remember the value of your time and the risk of mistakes.
4. Know The Tax Implications For Investments
If you retain the property for years, your property taxes due each year should stay somewhat steady. However, you don't have any direct control of these rates, and they could experience a surge that you don't expect. If your taxes are reevaluated throughout your ownership, it could trigger an increase.You also have to account for the increase in your personal taxes for the rental income you recieve. If possible, ask me about how I setup my investment company, or consult a CPA for advice on maximizing your tax deductions.
So, hopefully this list doesn't scare you off from investment properties because there is quite a bit of money to be made and adventure to be had if you plan the process right.
If I didn't believe in the housing market and making sound investments, I wouldn't have stayed in the business for the long haul like I have.
If you're intersed in an Orlando investment home, start looking at what is available on the market.
Be the first to comment on this blog entry!