One of the first questions you must answer when considering jumping into investment properties is the type of property you want: a fixer upper, rehabbed or new. Of course there are many factors that come into play and its important to decide what the best investment for you and your goals is. Here are some helpful tips to ease the decision process.
Real Estate Basics
Your first top priority when looking for a property should be location. It’s crucial to be in a strategic and desirable location. It could affect the financial value long-term of your property and how tenants value your rental. If you don’t choose a desirable location, you will either be in lack of good tenants and/or be forced to charge lower rent to get good renters.
In turn, a bad location could result in a loss of income, cash flow, and profits. There are a lot of benefits to investing in real estate such as tax-deferred gains. Yet, it requires a lot of hard work and ensuring that your profits cover your mortgage and operating expenses.
What To Expect With A Fixer-Upper
There are a couple of initial questions to ask when looking at a fixer-upper.
- Are you the handy man type?
Be honest about what your handyman capabilities are. It’s not worth your time or money unsuccessfully fix something and end up calling a professional. Assess what you can fix and what you need a professional for.
- What type of work does the property need?
Evaluate all the projects the properties you’re considering need. Do they need an aesthetic pick up or major repairs?
- What will the repairs cost?
Will the costs be justified with a higher rental price or increased value when you sell the home?
This is not a time to be optimistic, answer these questions and err on the side of caution. Make sure you factor all the costs you will have to continue to pay when you have no cash flow and always give yourself a buffer in case things don’t go as planned.
If you’ve found a fixer-upper for a great deal then check off these considerations first:
- Always check your math- give yourself a 10 to 25 percent buffer for expected costs
- If you can’t avoid properties needing serious system repairs
- Make sure you have the time, energy, and physical ability to fix the home
- Get a full inspection
Once you’ve chosen the best property for you, get a property manager to minimize costs and take care of everyday tasks.
Contact SOS Management & Property Services
Local: (858) 273-8800