Real Estate investing is much more than simply buying a home and renting it to a tenant. There are countless factors that need to be taken into account that may affect your finances and investment in the short and long term.
While each investment is different, there are a few simple guidelines that you can follow to ensure you are making a sound investment that will be profitable to you in the future.
The best way to find the market value of a property is to compare the recent sales of comparable properties in the neighbourhood.
Comparables can tell you what properties were selling for one year ago and what they are selling for now, giving you a clear understanding of how much prices have risen and what you can expect when you plan to sell.
You need to be aware of all costs associated with owning the property, this included operating expenses, loan payments, vacancy costs, taxes, immediate and future repair costs, etc.
Knowing the financials inside and out will help you decide if this is a worthy investment and how much you can expect to pay if/when the property is not fully tenanted.
Find Your Speciality
Do you enjoy flipping houses, fixer-uppers, small apartments, or single-tenant units? Focus on one type of specialty until you've mastered this and are ready to take on another investment type. If it's your first investment property, you may want to look at a single-tenant unit where rents will cover the mortgage and all associated costs, however, if you've got extra time and love doing renovations then a fixer-upper might be your niche.
Where are your tenants coming from and how do you get the best ones? If you're not planning to hire a property manager, this is information that you need to know. You also need to be aware of allowances for background and credit checks. Researching where tenants are coming from and what type of tenants are looking to rent homes will ensure you a smooth tenancy application process.
Educate yourself on the current tax laws surrounding investment properties and how they may affect you. Also try to stay abreast of any upcoming changes, as these may affect your finances and tax returns.
Research insurance coverages ahead of time to guarantee you get the best coverage and at an excellent rate. Don't be afraid to shop around and ask for quotes from numerous providers. You want to ensure your investment is covered for all possible situations that may arise.
Contact your local utility companies to obtain estimates of utility costs. You will also need to decide if utilities will be included in the rent or if your tenants will be responsible for these costs themselves.
Having a property inspection done will give you peace of mind that money can't buy. it will give you an idea of any problems the home is having now and it can also predict issues that may arise in the near future. For example, if the roof hasn't been replaced in 25 years, the inspector will make note of this and advise you that it may need to be replaced in the foreseeable future.
Whether you're a long-time investor with numerous properties or looking to purchase your first investment property, there's plenty of information to be aware of and lots of research to be done.
What are you waiting for? Let's start building your investment portfolio today!