Investment Property 101

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Buying your own home can be daunting in its own right. But what about buying a home for complete strangers to live in it? Scary, right? Well, yes and no—it depends on how prepared and committed you are to the responsibilities associated with being a landlord. Even in today’s market where supply and demand are lopsided, many are buying up property not for themselves but rather as an investment. So what does it entail, really, to go in on an investment property? The short of it is that there is certainly real upside to being a landlord so long as your smart and diligent in the role.

Do you have what it takes?

Start with asking yourself the right questions before committing to an investment property. Do you have the time to manage a rental property? Do you have the funds readily available and separate from other expenditures to maintain or make repairs to an investment property? Can you discern a potentially good tenant from a bad one? Will the stresses of landlord responsibilities be too much for you? These are all important considerations that you should seriously weigh.

The Property: Looking Smart

Once you have established that you are ready to take on landlord duties, finding a good investment property is next up. Just like the decision to become a landlord, purchasing the right property comes along with a lot of key decisions and considerations.

To ensure that you your property will rarely go vacant, consider the neighborhood you search in. Buying real estate for yourself is a different mindset than that of someone looking for an investment property. Areas with low vacancy rates and high demand for rental units are safer bets. You should definitely do your research of the area so take a look at rental ads in and around a property’s neighborhood to get an idea of how many rental units exist and are vacant. Keep in mind, when it comes to knowing if the neighborhood is the right place for your investment, a knowledgeable Realtor will do the homework for you and make sure you will look in the right place. Don’t forget to also consider location in relation to your home as it will determine the distance and time it takes you to get there to show to potential tenants or fixing a leaky faucet.

When you begin looking at potential investment properties, look for low maintenance and well-kept structures and appliances. Think about it, do you want to trek to your rental property for repairs or upkeep every month? If you expect more consistent turnover, expect to have repairs. That being said, if you go into it with a property with “good bones” you will save yourself some stress and money. For example, while carpets can be changed out, hardwood floors mean less work and can be protected with rugs. Additionally, smaller yards will mean less landscape work to keep up with on a regular basis, but in the long run a smaller outdoor space might also translate into less outdoor renovation dollars.

Lastly, but certainly not least, aim for properties that will be cash flow positive. While a lot of first time landlords think you can easily make your renters pay the mortgage payment and then some, this is really about investing in the right property. Often times first-time landlords find out the hard way that flashier properties are not as profitable as moderately price, more practical homes. Do not assume that—all things being equal—because your first year cash flow is positive, you will see much of the same over a long period. Lesson learned here: buy smart.

Buy smart, rent smart.

Once you get past the hump of finding the right investment property, the “real” responsibility sets in. The keys to success are simple in theory, but sometimes challenging in the execution. Finding the right tenant(s) is just one piece of the puzzle. Having a good working relationship with your tenant is another, which in turns means being a responsive landlord. Of course being responsive also means being resourceful and timely. What one finds in the course of owning and managing an investment property is a fair amount of effort and time.

Buying real estate is no simple feat. Purchasing for others at the expense of your wallet and time is a whole other ballgame. That being said, if you prudently step into the role of landlord, with the right property, a real investment you will have on your hands.

If you are buying or selling a house and are looking to hire a successful real estate agent to help you through the process, take a look at AgentHarvest's list of top-ranking local Realtors in your area. We found these agents by examining their sales track records, awards, rankings, client testimonials and by conducting personal interviews.



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