Whether you want to flesh out your portfolio or are just getting started, investing in real estate can be an enjoyable, lucrative endeavor. However, potential investors should not rush into the industry without proper preparation. Failing to understand every aspect of the business can lead to serious consequences. Devine Invest presents some tips you need to know.
Select a Property Type
As you can see on the Devine Invest website, there are many types of investment properties in Springfield to choose from, and each one has its own set of pros and cons. The amount of time and money you are willing to invest, as well as the location, will determine which option is best.
One way to get started is by purchasing a single-family home. A small house with one tenant can be attractive because the maintenance costs tend to be lower. There are also multi-family residences that range from two to four units; they include duplexes, condominiums, and townhouses. If the property contains more than four units, it is considered a commercial property. If there are multiple units, you may live in one of them and rent out the others.
Set a Budget
Investing in real estate involves more than purchasing property and finding tenants. You’ll need to obtain insurance, including house insurance and landlord insurance, and to take maintenance, taxes, and advertising costs into account as well.
Draw up a realistic budget that covers everyday expenses and leaves room for surprises. Decide whether or not your tenants will be responsible for the utilities and what the amount of the deposit will be. Create a nest egg to cover prolonged vacancies or eviction costs.
Explore Financing Options
While some investors are able to purchase a property using their own personal funds, many of them obtain loans. If you are looking to invest in your first property, the chances are high that you will need a loan. Speak with representatives at different mortgage companies, banks, and credit unions to find the best rates before signing any paperwork.
Create a Management Plan
Maintenance costs can be high, especially if the property is older and has fallen into disrepair. Even if it is in good condition, at some point you will need to replace the roof, furnace, or hot water tank. If you enjoy performing routine home repairs, live nearby, and have enough free time, you can save money by managing the property yourself.
However, if that is not the case, it is a good idea to think about hiring a property manager. While it may be tempting to attempt to handle the property alone, it is important to remember that emergencies can happen at any time. Depending on the agreement, a property manager can handle repairs, screen tenants, and perform other tasks as needed.
Research Laws and Regulations
You should thoroughly research all the applicable laws and regulations before purchasing an investment property. Failing to understand your rights and the rights of your tenants can lead to expensive legal problems. The US Department of Housing and Urban Development outlines several laws in place regarding discrimination based on things such as gender, race, or religion. Laws are subject to change, so review them periodically and revise your policies accordingly.
While it’s impossible to predict the future, an investment property can be an excellent addition to your portfolio as long as you understand your investment and are willing to put in the work.