Purchasing residential real estate investments is an excellent financial move. At the same time, it’s a very involved process if you plan to manage the property and be the landlord.
There are a few things that everyone should keep in mind before they make the investment and become a landlord. We’re going to discuss 5 of the most crucial tips to make your experience as smooth as possible.
Let’s get started:
5 Tips for Residential Real Estate Investments
There are a number of ways to make a residential real estate investment, and not all of them include being a landlord.
We’re going to stick to the ideas that apply to landlords, all except our first suggestion.
1. You Can Hire a Property Manager
Many people take pride in being a landlord. At the same time, hiring a property management company may take a little return out of your investment, but it could significantly reduce the amount of work and communication you have to have with tenants.
2. Run Background Checks
The return on your investment is directly tied to the people who rent from you. If they don’t pay, sure, there are ways that you could get your money eventually, but those methods often require expensive lawyers and a lot of time.
It’s best to take on someone with a great rental history, regular income, and a positive relationship with their former landlords. A clean criminal record is a good thing, too, but sometimes the person with the cleanest record can cause the most problems.
Mostly, use a background check and use your judgment.
3. Plan Your Flip
A lot of people get a little too invested in the easy, thirty-minute segments on HGTV.
There’s nothing wrong with HGTV, but keep in mind that flipping a house and making a profit requires a lot of time, effort, and planning. If you’re planning to flip a house, make sure you do your due diligence.
It may be wise to talk with someone who has experience flipping houses and learning how they do things.
4. Research Your Neighborhood
Your investment will be yield more returns if you select a neighborhood that you can expect to have an increased property value over the time that you own it.
You can make these decisions by assessing property value trends in different areas. While doing your own research could work, it may be wise to consult with a professional when making inferences about changes in the housing market.
5. Understand the 70 Percent Rule
When you’re looking for homes to remodel or fix up and sell, make sure that you understand the 70 percent rule.
How much will your home be worth after you make all of the desired changes? Take that hypothetical number and chop 30 percent off of it, and that’s the most you should pay for the home.
So, if the home will be worth $100,000, you shouldn’t aim to pay more than $70,000.
Want to Learn More About Property Management?
Hopefully, this article has helped you think about your potential residential real estate investments. If you’re in need of more information, though, we’re here to help.
Explore our site for more information on property management and how to do it right.