Anyone who even dabbles in real estate knows that real estate investment is a highly competitive industry. However, it’s possible to create a sound rental property investment strategy by keeping some tips and recommendations in mind. Here are six tips to maximize your profit in the property investment realm.
Make sure you know how much you are willing to pay for the property and make sure you do not overpay. Leave a little bit of cushion in case the property needs renovations or in case you end up having vacancies or unexpected repairs.
It happens too often; you find what appears to be a bargain, and then you buy it, only to find there are a million things you must fix with the property before you can rent it. Before you know it, the property has been vacant for a long time while you were fixing it, and you have spent a bundle making the necessary repairs. To avoid finding yourself in the middle of a money drain, make sure to get the property inspected by a highly rated and licensed property inspector, make sure that everything is up to code, and that you know exactly what it is you are walking into.
When buying an investment property to rent, ask your agent or broker for a list of comparable properties sold in the last 24 months in the area you are searching. Use this to compare the rental income, the purchase price, square footage, and every other factor you may deem relevant.
How to determine a good rental property? Well, the golden rule of real estate applies – location, location, location. You should look at the schools in the area, crime rate, and job market. Any amenities near the property should also be taken into consideration: is the beach nearby? Are there parks where you can walk the dog or take your kids for a picnic? What is the strength of the local economy? These things will make a difference in estimating rental prospects.
When buying an investment property you’re going to want to make sure it “cash flows”. This means that you’ll want to make sure that the income the property generates is more than the monthly costs to keep and maintain the property. When calculating this make sure to take into consideration your property taxes, insurance, mortgage payment, and a buffer for repairs. If the property still has a profit after all expenses then it will “cash flow” and will at least should be a profitable investment for you.
When buying an investment property to rent, you will also want to consider the cap rate. To find the cap rate, take your gross income and subtract the operating monthly expenses from your gross income; this will give you your net income. The next step is to divide the net income by the purchase price which will give you your cap rate and relative strength of your returns.
An experienced real estate firm can help ensure that you have a good rental property investment strategy. Optum Real Estate Management is Southern California’s premier real estate investment company, providing you with the insight, resources, and advice you need to make the best investment decisions. To learn more, get in touch with us at firstname.lastname@example.org or call us at 949-478-4696.