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PROPERTY INVESTMENTS - For those looking to make some passive income by getting into the property investment arena, there are a few dos and don’ts potential investors should know about when it comes to the landlord market.
Fortunately, property investor expert Doug Van Soest from SoCal Home Buyers is here to share his top tips for first-time property investors.
Understanding the Basics
First thing’s first - it’s advisable to conduct extensive research to truly decide if property investment is for you. Real estate investing often requires patience and a long-term view, so it’s important to make sure you are ready for that. Van Soest says, “Be sure to familiarize yourself with local property laws, tenant rights, and zoning regulations so that you’re up to date with all legal considerations.”
It’s also important to know how key concepts related to property investment work, such as cash flow, appreciation, and return on investment. Additionally, know that there are different types of properties to invest in, such as residential, commercial, or industrial properties.
Financing Your Investment
Set clear goals in order to determine whether you are looking for short-term gains, like flipping a property, or more long-term income, such as renting a property. Then, you can figure out how to finance your investment by using either personal savings, mortgages, partnerships, etc.
Be sure to include initial costs such as purchasing price, legal fees, taxes, and any immediate renovations in your budget. Additionally, don’t forget to include ongoing costs in your budget as well. “Ongoing costs could include maintenance, property management fees, insurance, property taxes, etc.,” says Van Soest.
How To Invest in Property
Once you’ve taken the time to do some initial research and set clear goals, it’s time to dive into the world of property investing.
Location is Key
Start by doing some more in-depth market research. Stay updated with current real estate trends and forecasts in order to choose a profitable market. It is also important to look for areas with potential for growth, good infrastructure, and low crime rates.
Decide early on where you want to invest by considering these key factors:
- Average cost of a home
- Average yield of a home
- Potential tenants in your area
- Distance from your home to your investment
- The popularity of your area
Narrow Down Your Target Tenant
Decide what type of tenants you want to rent to. For instance, are you willing to rent to students? If your property is in a university town, it could provide a large population of potential renters.
Depending on your property, your target tenant options will differ. For example, if you’re renting a single-family home, you are probably not going to appeal to young professionals or fresh graduates. Conversely, if you’re renting a studio apartment, you will most likely not be garnering the attention of a family.
Property Management
Van Soest says “Regardless of where your investment is, and who is renting it, it’s crucial to maintain. Otherwise, it will lose value over time.” Therefore, decide if you will manage the property yourself or hire a property management company. If the property is far from your home, it could be worth hiring a property manager.
You could also implement a thorough screening process to find reliable tenants. This will make less work for you down the line, so you’re not dealing with high-maintenance tenants.
Opportunities and Risks
Opportunities
A major reason to invest in the first place is to grow a home’s price. To make a profit on your investment, Van Soest encourages new investors to add value to their property with any renovations and/or improvements that could be made. Furthermore, think about the area in which you are investing. Is it located in and up and coming part of town? If so, this is another factor that could tie into a house’s price growth.
Additionally, investing in a property can provide a great return on investment. Not only can buying a rental property provide a source of passive income and let you pursue an exciting career as a landlord, but your property is almost guaranteed to sell later for a higher price than it was bought for.
Risks
Of course, there are some risks you need to be aware of too:
- Be sure to have a plan if the tenant’s rent falls through, as rent is not always guaranteed.
- The same way that a house’s price can grow, it can also shrink.
- High maintenance tenants can not only cause stress, but damage. Ensure that tenants are reliable and trustworthy that will treat the property with care.
- Be aware of the costs to maintain investments–some repairs can be expensive.
Protect yourself and your valuable new asset by compiling a detailed inventory of everything in the home. This will protect both you and your tenants in the long run.
Additionally, it is worthwhile looking into landlord insurance–also known as rental insurance or property investment insurance. Some of which include property damage and liability protection.
"Investing in property is not just about buying and selling; it's about understanding the market dynamics and being prepared to adapt. Real estate can offer substantial returns, but it requires a strategic approach and continuous learning to truly succeed," finishes off Van Soest.
Once you have done the research and understand the risks, you might just be ready to start investing in property!
About SoCal Home Buyers
SoCal Home Buyers is a professional Real Estate Investment company, founded by Husband & Wife, Doug & Andrea Van Soest. We help homeowners with Real Estate they need to sell quickly, or that’s causing a problem.
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