Published August 23, 2021
Real Estate Investing 101
According to Bankrate’s latest Financial Security Index Poll, Americans who have money to set aside for the next 10 years would rather invest in real estate than any other type of investment.
Bankrate asked Americans to answer the following question:
“What is the best way to invest money you wouldn’t need for 10 years or more?”
Real Estate came in as the top choice with 28% of all respondents (3% higher than last year), while cash investments came in second with 23% (the same as last year). The chart below shows the results:
The article points out several reasons for these results:
“After bottoming out at the end of 2011 following the worst housing collapse in generations, home prices have gone gangbusters recently, climbing back above their record pre-crisis levels. Prices (on average) jumped 6.6 percent during the 12 months that ended in May, according to CoreLogic.
Toss in persistently low interest rates, tax goodies that come with owning a mortgage, and the psychological payoff from planting your roots, and maybe it’s no wonder real estate remains popular.”
As an investor, you’ll need to decide for yourself whether or not investing in real estate should hold a place in your portfolio.
The most important things you’ll want to consider are:
Time, effort and financial commitment:
Beyond committing the time and money required to maintain homes, you must be ready to deal with all of the tenants' needs. If you don't have the time to dedicate to the role, or want to save yourself some stress, you may want to think about hiring a property management company to help you out with some of the work.
Preferred market area:
Rental market conditions differ by location. Once you know how much income you’d like to generate from your investment property, you can start thinking about location and size. From there, you’ll want to consider the property condition - fixer upper vs. move-in ready. Whatever location, size or condition you’re considering, make sure you’re keeping ROI (return on investment) in mind.
State and local laws:
Sometimes zoning laws or homeowners/condo associations won't allow properties in a certain area to be used as rentals, so make sure you aren’t looking in any of those areas. Additionally, be sure to check if there are any special fees or taxes on rental properties in your selected area - or if they must undergo regular inspections.
Industry guidance:
It is important to have a real estate agent and a real estate attorney on your side. It will be crucial to have an advocate you can consult should issues arise.
Maintenance expenses:
When investing in a rental property, you must make sure you're financially equipped to handle any issues that may come up. Tenants will want problems, especially big ones like a leaky roof or a broken heater, to be fixed as quickly as possible.
Tenant disputes:
When accepting tenant applications, be sure to run credit and background checks on all adults who will be living at the property and contact their last two landlords. However, understand that issues may still occur, and they may still fail to pay their rent on time or cause damage to the property. When they move in, have tenants sign a report indicating the condition of the property and what appliances/furniture came with the unit. That way, you have documentation of any damage that was present before they arrived and what items must remain when they leave.
An investment property is a huge commitment, but this multi-billion dollar marketplace is continuously growing.
Although the real estate market experienced an explosive 2020 due to changing needs that resulted from COVID-19 (and so far an equally explosive 2021), these changes leave room for new opportunities in the coming years.
Looking to chat with an experienced real estate agent about starting an investment portfolio? Call our Team today to discuss if an investment property is right for you!
315-701-6993 | RMTeam@YourCNYHome.com
