Are You Considering Purchasing Your First Real Estate Property?
By: Irwin Tauber
Irwin Tauber is a property developer and CEP of Taubco. Taubco is a commercial real estate manager and developer.
Thinking about purchasing an investment property? Real estate is known to be a smart and lucrative financial investment.
Regardless as with any investment, it’s better to have an understanding of what is going on before jumping in with your eyes closed, putting hundreds of thousands of dollars on the line.
Consider putting in a little time in research so that you can come out on top in the end.
Here Are 5 Tips to Get You Started.
How Do You Feel About Being a Landlord?
Are you good with your hands? Could you do minor repairs or plumbing? Considerations might include calling a professional to fix it for you, which is an additional money consideration. Or maybe hiring a property manager to deal with maintenance would make thing easier but will severely impact your profits. Often those who own multiple properties will opt to do a lot of their own repairs to save money.
Another option is to invest in team of professionals, say a contractor, plumber, painter, or a handyman from the very start, to offset any of these problems.
Find a Down Payment
If you’ve decided on an investment property, this usually will require a larger down payment than a residential one. Not only that, but the approval process is generally a lot stricter. You might be able to put down say five percent down on a home, but you will need at least a twenty percent down payment for an investment property.
Consider the best way to obtain this down payment whether it be via a personal loan, bank loan, or money from savings.
Find the Right Location
Location is everything!
You never want to invest in a rental property in an area that is not stable, or at least on an upward trend. Consider a city that has growth trends in population, employment, education, or one that has plans for revitalization. All of these can be a great investment opportunity. Focus on the neighborhoods. How are the local transportation options? Or the crime rates?
Make sure to perform your research. Check market values. Look at the numbers. Planning a location requires careful thought and consideration.
Consider REITs
What is an REIT? REIT stands for real estate investment trust. If you buy an REIT, you can then invest in real estate without actually having to deal with the physical property location.
REITs can be thought of like a mutual fund investment. Commercial properties like apartments, retail stores or office buildings can be owned by larger companies. You then can opt to invest in these management / investment companies.
This is a great choice for more passive investors and the dividends can often be high.
Think About Commercial Real Estate
Commercial real estate investing doesn’t have to be reserved for experienced investors. It can be a great opportunity even if you are just starting out. It is a lot more costly but will ultimately generate higher cash flows and better returns.
Some negatives include tenants vacating or being unable to fill empty buildings. Even when vacant, the mortgage still has to be paid. One factor to remember is that commercial properties typically have long leases. You are much more likely to have a stable tenant this way, although you might not be able to increase rent for long periods of time due to the duration of lease agreements.
In Conclusion
This information will allow you to get started. Take your time. There is a lot to learn in the world of real estate investing.
