Investing in residential real estate is a good way to make money, but it can be challenging if you’re a beginner. Buying properties that will generate income for you requires a different mindset than purchasing a personal home.
It is not an emotional purchase. As an investor, you have to buy a property because of its value, the income it will generate, and its potential for capital appreciation. If you investing in residential real estate, you need to do it right.
Tips For Investing In Residential Real Estate
Here is some advice to keep in mind.
1. Diversify your investments
Buying property close to you is a good idea if you want to manage the property yourself. But if you live in a neighborhood where property values are on the higher end of the market, you may not be able to afford an investment property near you. You may have to look further afield, especially if you want to buy more than one property.
Towns that have large universities or good schools and newly emerging towns often offer good investment opportunities. Investing across a wider geographic area can help you to diversify your investments and give you protection against the volatility of local markets.
If you plan on having properties in different locations, it is important to consider hiring a property manager. It is often more cost-effective to do so when you have more than one property. Everest, Davidson, and Western Property Services offer qualified property services in Colorado Springs. Property managers will help you to find a good tenant, maintain your property and collect your rent.
2. Pay attention to the location of the property
Buying an investment property to rent out is one of the best ways to make money in real estate. You can make money through rental income, and the property appreciates in value, so you can make a good profit over the long term if you decide to sell. But the location you buy in will determine your income potential and how much the property increases in value.
You don’t want to buy in an area just because the price looks right. A cheap house in an unsafe neighborhood is unlikely to give you good growth on your investment.
You need to look out for locations that have a high rental demand and offer good growth potential. The best neighborhoods have low crime rates, good schools, and access to parks. They have access to shopping malls, restaurants, and public transportation. One with a growing job market will also mean a bigger pool of potential tenants.
Related Resource: All You Need to Know About Property Investment
3. Think about your target tenants
It’s important to think about your target tenants and what they need and want. If you want to target students, a unit must be easy to clean and comfortable, but it doesn’t have to be luxurious. Young professionals will usually want a unit that’s modern and stylish. Families will want more bedrooms, bathrooms, and a yard. A single-family home is often the safest bet for attracting the right tenants who will want to stay in the home for longer.
You need to screen tenants to make sure they qualify. If you constantly have vacancies and have to keep finding new tenants, you won’t make as much money. Finding well-qualified tenants offers the most steady and reliable return on your investment.
4. Consider fixing up a property
You should also consider properties that need renovation. It is easier to negotiate a good price and then fix it up to add value. The price must be low enough to justify renovation costs and still offer profit. Renovation often comes with unexpected costs, so you need to have a safety buffer for this.
You should never over-renovate a lower-end house. It can still look modern and fresh without having the most expensive fittings and fixtures. It is often better to look for homes priced below market that only require a few minor fixes. This is likely to be the best option if you aren’t able to do the renovations yourself or know contractors that offer affordable, quality services.
5. Plan for maintenance costs
Neglecting regular maintenance will result in costly fixes further down the line. For example, finding small water leaks before they become a big issue can save a lot of money. Property management services can help to save you time and give you peace of mind by conducting annual inspections.
The best ones offer maintenance guarantees. If there is a vendor or installation-related problem with their work within the first year, they make it right at no cost to you.
You can’t expect to only incur routine maintenance costs. There will inevitably be burst pipes, leaks, broken toilets, etc. You will need to make sure you don’t have to spend too much on unexpected maintenance issues. Once again, property maintenance services usually have teams of reliable contractors who offer them special prices.
Arnab Dey is a passionate blogger who loves to write on different niches like technologies, dating, finance, fashion, travel, and much more.