Investing in rental property: 10 tips for successful competition
What is your goal with this investment? A target is only valid if it is written, communicated and framed if all your decisions. If this is not the case, you wish that I did not take much risk in saying that they will remain wishes.
A goal is something you really want to accomplish.
The process for rental investment is simple: find a property investment fund, and manage the property again.
In addition, you may be interested in these 5 golden rules of property investment.
1. Find a motivated seller
The one rule of thumb is to buy well. To buy, there are no secrets, he must buy from someone who really wants to sell. Rule No. 1 of the rental investment is simple: you make your profit from the purchase, not for resale. If this is not the case, it is not worth the trouble.
If you buy too much, perfect management often can not restore the profitability of your investment. One of the reasons why I recommend you buy at the right price, you certainly can not know the state of the market when you want to sell and therefore it would be a bit surreal to bet on an increase the price of the property.
By focusing on immediate profitability, you protect you against many things including having to sell your property if you do not have the means to maintain it.
Find a seller who does not earn money with their investment, who lives near his property and who must move, which is poorly informed on the market and you have a good chance to buy at a good price.
The purchase price is decisive and the rent that you can draw well. Do not pay too much good and do not overestimate the rental value.
2. Set your target
At an initial investment and according to our borrowing capacity, the choice is often between a studio and an F2. Regardless of your choice, you must be consistent and use common sense. If you are targeting students, small areas traditionally reserved for them.
The consequence is that the location should be chosen depending on the target. Everyone knows that the location is one of the keys to a successful investment but on the ground reality often takes over.
Also in the example of our studio for a student's environment is very decisive. If you send this studio for young workers, the criteria are different. Depending on the population, there are advantages and disadvantages as known for example that the students have little time and requires regular replacement of the research but has the parental bond.
The location should not be chosen in spite of low attractiveness.
3. Do your research, visit a lot and made some proposals
Wisdom dictates that we must visit a large number of properties for purchase. The research method can be confusing because the media are many: Internet, newspapers, real estate agents ...
Level 1: internet
Attractiveness of the city or neighborhood good? The factors that attract people are simple: work, schools and reputation. If there are many jobs, the city attracts people. If she has a good reputation is even better. The university towns are also popular with students.
Other interesting features are: casinos, airports, national events and administrative buildings.
Supply of limited? If too many properties, you are for disaster. Currently many medium sized cities are overcrowded in De Robien due to the negligence of developers and investors.
Quality of infrastructure adequate? The city or neighborhood is it properly managed? The investment they made in a timely manner?
Tricky at the moment but it remains an important indicator for your choice. The diversity of this perspective is important. Avoid locations that depend only on a single large employer.
Level 2: People and Trends
Meet, discuss and verify your findings with those of the corner. You conclusions are validated?
Could you set the trend and see how the district will be in 10 years?
Are there buildings or changes that may affect the market? (rental demand, property value)
Level 3: immediate environment
Shops, schools and transport are the 3 key points. The immediate environment determines the attractiveness of property for a tenant. He is willing to concede something about the building or neighborhood, but it must be close to the elements it needs.we cannot modiffy the enviornment.
There is never a single market, even in a neighborhood. Sometimes some streets enough to find themselves in a very different environment. Know differentiate sub-markets.
Properties for visit
The number of properties to visit may be limited by the layout, but the basic principle is simple: the more you visit, you'll most likely find very interesting. They may be visiting 40 or 50 apartments with no problem. It takes time but the price to find the diamond in the mine.
The visit of the property should start after making your searches and set your goals as this will allow a few moments to take a decision.
Ideally you buy your property to someone who has not yet sold. You want to avoid being in competition with all investors.
4. Buy next door to you
This criterion is simple but I am a full point. Always always buying close to home. The alternative is to buy a place they know well (eg the city where we come). The proximity is necessary for 2 reasons:
* Really knowing where you buy,
* Able to intervene if problems arise.
If you manage yourself well, it is more preferable to be close.
Of course there are many examples where remote management is going well. What I want to avoid is having to go in an emergency or 2 times to resolve a small problem that requires my presence and that discourages me.
5. Create your team
You must consider that the first investments is a learning process. A realtor, a lawyer and accountant are 3 members of your team you must select carefully. Sometimes finding a good craftsman is necessary.
Other members may be architects, insurers, bankers and surveyors.
If you really want to be serious in this area, you will be prompted to create a duty team.
If you invest with a partner while you watch:
* Are complementary
* Healthily can discuss an idea,
* Work and reap the rewards from fair
* Have the same objectives,
* Share the same values.
6. Unplug your instinctive side
We must analyze the properties efficiently. The best way is to establish a written list (typically Excel) criteria. The list of criteria you guarantee that you will not "fall" in love with a well and that you properly compare the different properties.
Analyze the property from all angles. The items to watch are numerous but this does not mean that one can not control them. If you find a problem, it is perhaps no reason to cancel the purchase but to negotiate the price accordingly. In this case, nothing worth an estimate established by a serious professional for repair.
You will find here a more complete list of checks to perform before a rental investment.
Generally, a tenant will be less demanding than a buyer. This is a point not to forget.
7. Make your profitability calculations
Calculate the return on your investment. Below 6% Net income (after taxes), investment is questionable. You do not have any surprises.
The price charged by the seller has no merit. He often based his hopes on an estimate or herself based on questionable data.
It's up to you to calculate the price you can give based on the performance you want. For this you need to get the rent and be sure that is the real rent. Trust but verify.
Often, properties are overvalued, but this does not mean that we must conclude that you are wrong. You buy a financial income stone steps. If the income is not good, your investment is unsuccessful.
But two other factors may play in your favor: the potential rent and future rent.
The potential rent is the rent that could get the current owner by making some simple changes. It is these changes that you can do immediately to raise the rent.
The other, the future rent is supposed to increase the rent based on the property, the environment and increase the ceiling framed by the law.
Maintenance costs should not be underestimated. Plus the building aged, more expensive maintenance is a general rule you can follow.
8. Financing your investment
Finding funding can be long but to avoid losing an opportunity, it's worth checking your borrowing capacity before making a bid as you would have to buy your own home.
9. Please do the right thing, stay informed
What has assembled at the beginning of an initial investment, he usually loses his later regret as a self-fulfilling prophecy: we can not win with real estate.
The professional investor does not hesitate to do the right thing whether marketing the property for rent, insurance to protect or advocate to study a difficult problem before buying. There are areas where we should not make small savings and any study before buying a property is critical.
In another aspect, all the news may interest you to track the value that your property has: Crime and investment in infrastructure are 2 important elements.
10. Find a good manager
The management is a critical point. If you have purchased, management can ruin your purchase and your cashflow. Even if you do not plan a priori to assign the property manager, allow a margin in your calculations for this event.