Successful rental property investors know that timing is key to all transactions, and the stars may be aligning this year for new investors. Financial experts say the current low interest rates combined with low home prices make 2014 and 2015 the last time in a decade to invest in real estate. What’s more, real estate markets across the country are continuing to recover from the market low in 2008.
So while the timing may still be right, you’ll definitely need an edge to get the right deal in an increasingly competitive market. In many markets, the most lucrative opportunities can be found in rental properties.
And finally, consider the type of investment you want – are you interested in single family homes, condos, or apartment buildings? Defining what you are looking for is the first step to finding it.
Here are four tips you can use to increase your competitive edge:
#1 Experience Matters
If you are new to real estate investments, you may want to explore residential housing. On the other hand, if you are a seasoned pro, perhaps it’s time to explore bigger ticket properties like apartment and condo complexes.
No matter what your experience level, you’ll want to partner with an experienced real estate agent who specializes in your preferred property type and who can help you find potential properties. Pro tip: look for relational brokers who want your long-term business. They are much more likely to recommend promising deals so they can earn your business deal after deal.
Even if you choose to go it alone, make an effort to talk to other investors about their experiences – successes and failures. A great way to do this is on the web – just search for real estate forums in your local community. Another option is to sit in at your local district court and watch the tenant/landlord cases unfold – you’ll get a sense of the challenges landlords face.
#2 Location Matters
Do your research and find the right location. Location is key with rental properties – the difference of just a few blocks can mean hundreds more in rental payments each month. Look for homes in high-rent areas and stick with urban areas. Rural areas may be quaint, but there are far fewer potential renters and as a consequence, rental returns are much lower.
Look at crime and school data – high-end renters tend to be married and have school age children. Other selling points include access to shopping, public transportation, and parks. The more you can offer in terms of amenities, the higher you can charge for rent.
#3 Take a Look at Your Finances
In this market, it’s important to make sure you won’t run into cash-flow issues. Have a discussion with your lender or financial planner about the ups and downs of the rental and flipping market. For instance, if you are renting a property, count on vacant months between tenants. If you are flipping a home, you may have to hold onto it for months before selling.
Short on capital? Another option is to work with a more experienced investor and close the deal as partners. The impetus for the investor? In this economy, an experienced real-estate investor is more likely to work with your capital.
#4 Create Your Network
Houses break. We all know that, but few of us plan for unexpected repairs. Line up a maintenance pro who can fix minor issues and act as your advocate and adviser on major repairs. Consider keeping an attorney on retainer to consult with on tenant issues, an accountant who can handle your income and expenses, and maybe a property management company to handle the day-to-day issues and communications. The better your support network, the better you will be able to deal with issues that will invariably come up.
Whatever property you decide to invest in, keep in mind that purchasing and maintaining an investment property is an entirely different animal than buying your primary residence. We all tend to make emotional decisions when we think about where we want to live, but with investment properties people tend to think more about what makes financial sense.