If you’re getting a little extra dough this holiday season, consider an investment property! Julie and Daniel Desrochers from Desrochers Realty Group and Coldwell Banker Burnet think now is a great time to pick one up. They stopped by to share their advice!
Julie and Daniel’s thoughts are below:
Things to consider when purchasing and investment property Time of Year:
- Currently it is a great time of the year to purchase.
- Inventory is lower but competition from other buyers is much lower
- Sellers that have been on the market for a while are now more motivated to sell their property so they don’t have to hold on to it till Spring
- Be conscience of when you will be closing and will have to rent the property out. If you can push the closing date out a little bit so you aren’t having to find a tenant till February or March you will probably be able to collect more in monthly rent.
What Type of Property:
- Single family, duplex or multi family, Commercial?
- Benefits and negatives to each
- What condition do you want the property in
- Are you willing to do work to update or do you want it in great shape & ready to rent out
How Will You Pay for the Property:
- If you finance you will need to put at least 20% down
- Make sure you have enough money for down payment and repairs that will be needed, including unexpected ones.
- Just because you have cash to purchase a property outright may want to finance because of how low interest rates are, could by multiple properties instead of one.
- Could be tax benefits
Cash Flow or Equity Growth:
- Are you purchasing for cash flow, equity building or a combination of both?
- Different ways to asses a property and the investment you want from it
- Do you want a high monthly cash flow, rents may be very strong in an area compared to values but there may not be as much potential for the property to increase in value.
- Would you rather have lower cash flow but higher opportunity for the property to increase in value in the future.
- You can usually get a combination of both or one or the other but cant get it all
Assessing Cash Flow: When assessing cash flow you need to think about the following things:
- Mortgage payment
- Property tax, will be a little higher than normal as they will be non- homestead taxes
- Insurance, do you need additional insurances like flood insurance
- Any utilities
- Money for upkeep and repair
- Manage the property or hire a management company
Team of Advisors: • Make sure you work with a knowledgeable realtor and have a good network of advisors • You wan to work with a realtor that owns investment properties so they can advise correctly and has recommendations for the following if you don’t already have relationships:
- Insurance agent
- Property manager
If you see a good property you need to act quickly. THIS IS THE BIGGEST MISTAKE WE SEE POTENTIAL INVESTORS MAKE!! Once you have the property under contract you will have an inspection period time to do your due diligence. Which includes, Inspections, verifying rents, obtaining bids for repairs, updates, etc.