Have you ever thought about trying your hand at investing in real estate? Are you thinking of the property as a rental to make money off, or are you wanting to renovate and then sell? We will be discussing investment properties and going through some questions that may help you decide if it's right for you.
"What's my budget?"
This question is one that you should be asking yourself and going over with a financial advisor. Knowing your budget is crucial because you need to know what you can afford to buy and the cost of renovation of the property if required. Whether you turn it into a rental or flipping the home to sell, you do not want to run out of money and not finish your project. Do not be afraid to reach out to your community to see what they are looking for in a home or rental. Feedback from the people that you are serving is the best way to get information on how to better your business or side project.
"What is the vacancy rate in the neighborhood?"
Being able to understand the vacancy rate is vital. You want to make sure that you will rent your rental, or if you put your renovation on the market that it will sell. Buying and selling tend to have trends, so make sure you are entering the market at the right time. If you are renting your investment project, places with colleges nearby, army bases, and even hospitals are institutions you should contemplate. These institutions have people that are constantly rotating and moving.
"When was the roof, furnace, AC Unit, and water heater replaced?"
These elements are something that can be a considerable expense if they need replacing. It would be best if you asked your agent about the age of these items, and they should be in the property disclosure. Be sure to use your judgment as well when looking at the house and observing these items. You will eventually know what you will have to replace and can allocate these expenses into your budget.
"Is the home in a flood zone or prone to other natural disasters?"
Some houses tend to be in the flood zone, which can be a concern in many cases. Make sure to check the FEMA's flood zone map and see if your agent can find out if the home has ever flooded before. Even if the property is in the flood zone, the owners must be as honest as possible when filling out the Property Condition Disclosure Statement (PCDS). They will be able to let you know if the property has flooded before. This information is super important and can affect if the home is worth buying or not.
"Trends of mortgage and rent rates?"
Understanding and watching the market is something that can benefit you as an investor. You want to make sure that you are purchasing and either selling or renting at the right time. Learning trends before you get into investing will help you once you have started investing.
If you are thinking of investing in real estate, be sure to talk to agents and lenders, and other people who are willing to share their experience in real estate investments. It can be a tricky process to start, but the individuals in real estate investing thrive off taking a risk and facing challenges head-on. Hopefully, with these questions, you can see if you are willing to take on a side project that can eventually become your full-time responsibility.