Get the lay of the land before you become a landlord
Whether you’re already a real estate investor or you’re just getting started, knowing exactly what to look for and how to evaluate a property is essential to being successful. And while the market will vary depending on where you’re looking to invest, there are some key factors to consider that can help you differentiate a winner from a potential loser. Take a look:
1. The right place in the right place
Before you even begin to crunch the numbers, and this may seem like a no-brainer, it’s important to find the right place in the right neighborhood. Most seasoned real estate investors will agree that when looking for a deal, always try to find the ugliest (or the cheapest) house in the most expensive area you can afford. This goes for whether you’re planning to rent it out, flip it, or live in it at some point. After all, there’s little value to a gorgeous piece of property if it’s in an awful location. It makes sense, right?
2. Check out rentals in the area
It’s always a good idea to check out what’s for rent in the area in which you’re looking to invest. You want to compare what’s being offered and at what price point. This gives you an idea of how much you can expect to get for your place, and if your estimates are reasonable.
3. Scope out the neighborhood
Is it a quiet, safe area? Is there a lot of traffic? How convenient is it to major highways, shops, schools and entertainment? Make a list of the pros and cons for each property you’re considering so you can weigh each one before making a decision.
4. Crunch the numbers
Of course, some of the top considerations are the price of the property, how much, if any, work needs to be done to it, and how much income it can generate for you. Investors have different methods of calculating just how viable a property is, but the bottom line is, any choice should garner a certain percentage of profit for you beyond your mortgage, taxes, and insurance payments to be worth your while.
5. Keep the emotion out of it
When you buy a property that you intend to live and raise a family in, it’s perfectly normal to be emotional. But when it comes to an investment, it’s recommended that you think of it strictly as a business decision and not allow your emotions or personal preferences to sway you. So, in essence, you don’t necessarily have to be in love with the house— theoretically, you don’t even need to like it.
6. Be aware: Investment mortgages are pricier
If you’ve never purchased an investment property, you may not be aware of the fact that a mortgage for a rental often comes with a higher interest rate and a larger down payment than an owner-occupied property. This is because investment properties can be a higher risk for lenders, since as the owner, you are not going to be on site, increasing the potential for problems that increase their risk of not being paid (for examples, you can’t get a renter or your tenant destroys the place).
7. Enlist the services of a professional
Experienced real estate investors will tell you that it’s always smart to work with a Realtor when seeking a property. A real estate agent who has worked with investors will have the experience and knowledge to guide you through the process, including finding the right place at the best price. He or she will also serve as a great resource for inspectors, contractors and any other professionals you may need if repairs or updates are required.
And in the end, a Realtor can also assist you in finding quality renters by screening potential tenants and weeding out the less desirable ones before you even meet them—which can save you time and money.
Real estate is one of the most viable and stable ways to invest these days. When you’re ready, make sure you take all of these factors into consideration before making an offer. For help throughout the entire process, get in touch with Dante Disabato at 239.537.5351 or through our online contact form. He specializes in finding clients the best investment deals in Naples and throughout the entire Southwest Florida market.