Five Things to Consider Before Purchasing That Investment Property

 Posted on December 00, 0000 in Foreclosure

The real estate investment industry can be lucrative for the financially savvy, but it can also ruin investors that refuse to do their homework. Furthermore, there are several potential pitfalls that one must avoid when first entering the industry. Learn how to avoid them, and discover how an experienced real estate lawyer can assist with the transaction on your next investment home purchase.

Condition of the Property

While some investment properties may have little to no damage, others may have serious issues. These properties, which are often referred to as distressed properties, can give you more return on your investment (ROI), but only if you are realistic about the time and money it will take to make the necessary repairs. It is also critical that you consider what repairs must be made before anyone moves in since you will not be collecting rent at that time.

Location, Location, Location

The location of a property is crucial to its long-term ROI. Homes located in a declining or stressed area may be less likely to rent (unless you are willing to work with persons who have less than perfect credit and limited funds to improve a community) at a rate that offers a return. However, up and coming areas may cost you more upfront. In short, it is important that you take the time to consider all the pros and cons of an area before making a purchase.

Does the Property Adhere to the 1 Percent Rule?

There is a hard and fast rule in the investment industry, and that is that homes must adhere to the 1 percent rule. Essentially, it means that a property must be able to pull in one percent of its total cost each month. So, for example, if you purchase a home for $100,000, you need to be able to rent it out for at least $1,000 per month. If the home cannot pull that much in, then it may be best to walk away and find a different property.

Who Will Manage the Property?

Being an investor does not automatically make you an exceptional landlord, and being an exceptional landlord does not necessarily make you a smart investor. Instead, these aspects of the business are often separated; the investor invests and owns the property, and a property management company may handle the day-to-day landlord duties, such as late-night phone calls over plumbing issues. While you can manage the property yourself, it is important to consider if you are willing to do so. Investors are also encouraged to consider whether self-management may hinder their ability to expand their portfolio.

Taxes, Insurance, and Unexpected Expenses

The expenses of an investment property go well beyond repairs, maintenance, closing costs, appraisal fees, and attorney fees. There are also taxes, insurance, and other unexpected expenses that may crop up along the way. Investors are encouraged to consider these costs carefully and to ensure they have a budget and additional money set aside for any additional expenses that cannot be reasonably planned for in advance.

Contact Our Naperville Real Estate Attorneys

At Lindell & Tessitore, P.C., we understand the importance of a smart investment. Dedicated and experienced, our Naperville real estate lawyers can assist you through the entire transaction process, from start to finish. Skilled in handling even the most complex of real estate transactions, we can protect your financial future and your investment portfolio. Schedule your personalized consultation with us to get started. Call 630-778-3818 today.

Source:

https://www.forbes.com/sites/forbesrealestatecouncil/2017/09/11/seven-things-to-consider-when-buying-an-investment-rental-property/#111087c66dad