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Today we’re going to be discussing investment properties. If you’ve been thinking about investing in real estate yourself, either by renting them out or flipping them, we’ve got some important information for you to absorb today before you get started.
The first thing you need to ask yourself is, “Why am I doing this?” When you’re in the middle of a transaction, you’re going to come across things that make you question what you’re doing. That’s why it’s important to have goals beforehand. The reason I wanted to start investing in real estate was because I wanted to develop passive income to give me the ability to have financial freedom so I can invest in my family when I have the time. Instead of thinking about how you will get a rental property, consider thinking first about why you are going to buy real estate. This will allow you to move forward when things look difficult, by recalling your strong and powerful “why.” Now let's talk about a few actionable steps you can take if you’re looking to buy a fix-and-flip property.
Have a clear understanding of the home’s “after-repair value.”
Have a clear understanding of what the market conditions are like around the property.
Have a clear understanding of exactly how much repairs will cost.
One helpful way to avoid many of these mistakes is by hiring an expert real estate agent. It’s a huge advantage because you can learn and grow from the mistakes or successes they’ve had previously, without having to make any mistakes yourself.
Another reason you need to hire an expert to help you with buying an investment property is that they are tuned into the market. They can let you know exactly what you can rent or sell the property for. They can also help you determine your cap rate. The cap rate is found by taking your purchase price and dividing that by your net annual operating income. Cash flows will be harder and more lucrative in “C neighborhoods” or entry-level neighborhoods. When market shifts occur, these neighborhoods will always be the ones to get hardest. So keep that in mind when investing as well.
If you have any questions for me or are looking to invest in real estate yourself, give us a call or send us an email. We would love to hear from you.
