Twila E. Palmer's Blog
The real-estate market is starting to recover: U.S. houses lost $489 billion in value during the first 11 months of 2009, but that was significantly lower than the $3.6 trillion lost during 2008 and things only continue to look up. While the timing may be right, you will need to have all your ducks in a row. An investment purchase is different than your typical purchase. Consider your options. Have a strategy and know what kind of investor you would like to be. Ask yourself if you want to be a landlord, or are you planning on flipping or restoring and reselling properties. What types of properties are you interested in? There are many choices from land, to apartment buildings, residential housing and other commercial real estate. Partner with experience. Real estate agents experienced in investment property deals know what to look for in a deal. You may also want to consider asking a more experienced real-estate investor for advice. If you plan on becoming a landlord make sure to familiarize yourself with the local laws regarding being a landlord. Location, location, location. If you buy a property with hopes of renting it out, location is key. Homes in high-rent or highly populated areas are ideal; stay away from rural areas where there are fewer people and a small pool of potential renters. Also, look for homes with multiple bedrooms and bathrooms in neighborhoods that have a low crime rate. Also think about potential selling points for your property. If it's near public transportation, shopping malls or other amenities, it will attract renters, as well as potential buyers if you decide to sell later. The more you have to offer, the more likely you are to please potential renters. Have capital lined up. Speak to potential lenders or a financial planner about what you will need for assets and cash flow. You will need to have enough assets to handle the ups and downs that could come with investing. Most experts suggest a fallback of about six months of mortgage payments for landlords. You will need this in case or vacancy or repairs. If you're planning to fix up a home and sell it, you will need reserves to cover the costs to maintain the home while it is on the market. Becoming a real-estate investor is much different than being a residential homebuyer. A buying decision is a business decision not one based on emotions.