Investor
Ready to Invest in Real Estate?
Need to fund your retirement, plan for kids college, or create passive income? In the ever-changing housing market, building wealth through real estate is still a fundamental strategy. Owning real estate as part of your portfolio can benefit you with short-term gains as well as long term appreciation.
If you would like to have a confidential discussion about investing in real estate call us at 602.352.3600 or Ask an Agent here.
Our philosophy is to help our clients safely invest based on cash-flow first, with appreciation and increased equity being a potential benefit of ownership. The key is to invest wisely. One of the smartest real estate investments is income-producing rental property.
Right Location First, determine where your potential renters want to live. Purchasing property near freeways, shopping, parks, and in popular school districts will help insure that your property will be desirable to a large base of potential tenants and limit vacancy. Your strategy should include more than one area.
Right Property There are many aspects to consider before you purchase a rental property. For instance, a three or four bedroom home is easier to rent than a four bedroom home… unless you are purchasing in a retirement area, where two bedrooms may be superior. A updated kitchen and afresh, clean, modern interior will make your property stand out. Many tenants may desire a pool, and this may increase the rent, but you need to weigh this against the liability and maintenance that goes along with a pool. Look for homes that are relatively easy to maintain. Newer homes have less maintenance, but usually cost more when they are in desirable areas.
Right Price While this may seem obvious, there are many factors that help determine a good value and therefore price. The most effective way to build instant net worth is to buy a property at a “wholesale” price. We have access to wholesale properties for our clients that are experienced and not particular about area. Most of these properties are in need of some repair or complete fix up. When purchasing wholesale properties they are sold as-is without inspections and many times the buyer is responsible for paying all of the closing costs so this must be factored in. This type of investment property is not for everyone as there is greater risk to the buyer than purchasing through traditional channels.
Do The Math First, figure the monthly expenses on the property: mortgage, utilities, taxes, insurance, HOA fees, maintenance, etc. Next, determine how much your monthly rental income will be. This can be determined by researching comparable rental rates for similar properties in the area. You will also want to factor at least one month’s vacancy expense. Your income needs to be greater than your expenses. The nicer the property, the lower the return or cash-flow. Our philosophy is to help our clients safely invest based on cash-flow first, with appreciation and increased equity being a potential benefit of ownership. Experienced investors will also factor in depreciation and long term asset growth, some trading monthly cash-flow for better quality properties with less tenant challenges and more potential for appreciation.
Limit Your liabilities Before purchasing any property, a home inspection is a wise idea. It’s important as it can help to prevent a future denied home warranty claim due to pre-existing conditions. Not only will costly repairs take a bite out of your profits, but as a landlord, needed repairs can increase legal liability and increased risk of lawsuits.
Be sure to consult with a Real Estate Agent and CPA that have extensive experience with investment property.
