Top Tips for New Real Estate Investors Looking to Turn a Profit
Real estate is almost always a good investment. But that doesn’t mean that it’s foolproof. If you’re looking to start a career in real estate, then you have to slow down and be strategic. Of course you want to turn a nice profit on your first endeavor, but rushing will make that goal unlikely. Today’s tips from Renovation Face Time are just a few of the things you have to consider as you decide how to build your wealth through real estate.
Partner with a Realtor
There are many things that you can do yourself. Investing in real estate should not be one of them. While there is plenty of information out there on the internet, only an experienced realtor or agency will be up-to-date on the current pulse of the market. Find a real estate expert that you trust and partner with them for a better chance at success.
Work with Professionals
If the property you’re purchasing needs a little TLC, it’s important to work with contractors who can help you address any problems you encounter. Your needs could run the gamut from interior repairs to landscaping woes. For example, if the property looks great except for the dead tree in the backyard, hire someone to remove it for you.
Fortune Builders recommends that you consider hiring a property management company to deal with the day to day aspects of being a landlord. You will need to set up the rules and expectations for the property, as well as how much you want to list for rent and what stipulations you will have on potential tenants.
If you manage the property yourself, you’ll also need to do the listing, screening, and paperwork for all applicants as well as deal with repairs that come from daily wear and tear. On the other hand, a property manager can handle the screening and upkeep for you.
The Dollar + Sense blog points out that there are many reasons to outsource the management of your new investment, including lower vacancy rates and having someone with experience in rental laws and regulations.
Keep an Open Mind Regarding Properties
You probably already have an idea of the type of property that you want. In all likelihood, this is a single-family home in a nice neighborhood. But, it might be wise to keep an open mind. You can always buy a home that needs work or purchase a small duplex or multi-housing unit. The benefit of a fixer-upper is that you control how much money you put into it. A significant perk of the duplex is that you can live on one side while you use the other as an income stream.
Be Realistic about Renovation and Upkeep Costs
You will also need to pay close attention to your interest rate, closing costs, the cost of repairs, and expenses you had yet to consider, such as landlord insurance, maintenance, and property taxes. Your renters are also not responsible for things like lawn mowing, which costs an average of $67.50 according to LawnStarter. While this is a small expenditure, it is just one example of ways costs can quickly add up. You must price your rental accordingly.
Don’t forget to factor in the cost of preparing the property for tenants. No matter how great the home is, you will need to apply a fresh coat of paint, make whatever initial repairs are necessary, and possibly refresh the fixtures depending on their current condition. If you’re looking for renovation ideas, check out Renovation Face Time. They offer a variety of helpful articles to inspire and direct your next home project.
Form an LLC and Choose a Registered Agent
As we mentioned a moment ago, hiring a property manager can help you stay within the letter of the law. The Law Offices of Stimmel, Stimmel & Roeser explains that there are many obligations that landlords have to stick to, including disclosing property information and maintaining the home so that it remains in livable condition. If you fail to do this, you may find yourself at the wrong end of litigation.
Fortunately, there are ways to protect yourself, even if you do not choose to use a property management firm. Renting your properties under the scope of an LLC, which is a limited liability company, can keep your personal assets out of any lawsuits. You can use an online service to get set up, or you can find a local attorney with experience with business structure formation.
It’s important to note that an LLC requires that you appoint a Registered Agent. This person or entity is the point of contact for your business. While you can choose to be your own Registered Agent, your personal information will become publicly available. There are, however, several registered agent services you can choose from to represent your business. Be sure to read through their reviews and services before choosing one.
Understand the Financial Commitment
Another important step is to fully understand your financial commitment. You’ll need to start by being diligent when choosing homes. Even if you find one that you think is perfect, if it’s overpriced, you may not make any money. To determine if you’re paying too much or you’re getting a great deal, look at the recent selling prices of similar properties nearby.
Understand the Costs Involved
One last tip: be honest with yourself about whether or not you would be a good landlord. A good landlord is organized, respectful, trustworthy, and transparent. It also helps to be good with money and have a friendly, warm personality. If you are ready to look further into whether or not it’s time to invest in real estate and form your own LLC, contact a trusted real estate agent today to get the process started.