Friday, January 22, 2016
How to Find which Investment's are Right for You
While many clients turn to real estate professionals to help them find a home, others instead are looking for a way to invest in their future. Often clients are putting a good amount of their own savings towards what can be a risky expenditure, so being able to advise them properly is important. There are several factors that should be taken into consideration.
Researching beforehand if a particular neighborhood has a strong rental market is key. Is it already over saturated? Will the amount the client can rent the property for be enough to cover a mortgage, insurance, property tax and maintenance? Areas where home prices are still low but a large number of people live or visit, such as South Florida, are potentially good places to invest. It is the real estate professional's job to know their local market well enough to answer these questions.
A larger home will obviously cost more upfront, but will also demand a far greatly monthly rent. An experienced real estate agent should sit with the client and decide how large - or how small - they can afford to go. A rental unit that is too small may not earn enough money to cover its own costs. On the other hand, a larger unit requires a bigger down payment and higher carrying costs. It can be a delicate balance, and inexperienced buyers will need guidance in choosing the right size.
When a buyer is deciding on a budget for an investment property, it is important for the agent to go over all the hidden costs associated with buying. That includes everything from closing costs to a monthly insurance payment that will be higher for investment properties than regular homes. Buyers also need to also keep a financial safety net, as it can sometimes take weeks or even months to find a good tenant. It is easy to underestimate these costs when house hunting, which is why an agent should be just as aware of the client's budget as they are.
Fixer Upper Vs. Mint Condition
Whether to buy a property that is ready to rent immediately or instead save money on a fixer upper can be a difficult decision in itself. Important points to consider are how much money it will realistically cost to fix the unit, and how long those fixes will take. Every month that the property is empty is another month where the buyer will have to carry the mortgage and other costs. Sometimes what looks like a bargain is actually a money pit.
Gennady Barsky is a real estate mogul from NYC.