As a first-time investor, you need to be aware that the real estate industry has many tricky situations that if not handled well, could affect your returns significantly for the foreseeable future. Choosing your first property can be an exciting process, but before you do anything else you it is recommended that you research the local real estate market in depth before making a purchase.
Here you will find tips that will help you save significant amounts of time and money when you purchase your first property.
Define your Geographical Boundaries
These boundaries will be up to you and whether you plan to manage the property yourself or if you plan to outsource a real estate managing service. If you choose to do the latter, your geographical boundaries will expand significantly.
Meanwhile, if you decide to manage the property yourself, choosing a property within a close distance to your home is your best bet.
Start with a small property
Investing in a large-scale property as your first venture one will be challenging, especially if you´re not ready to handle it or do not have outside help from an experienced real estate investor.
Start small with a loft, single-family home, or condominium.
This is the safest way financially to acquire the experience necessary to pursue bigger ventures in the future.
Beware of the fixer uppers
If you are investing in a brand-new property chances are that there is very little work to do to the property itself in terms of renovations. However if you are buying a used property then you should look for options that require little to minimal repairs. To figure out the exact state of a property, hire a certified contractor to perform a complete inspection of the property and its electrical and plumbing systems.
The exception to this would be having a good contractor that will do the repairs for you with a low cost or if you have vast knowledge of renovating real estate. Otherwise be prepared to invest in renovations and possibly being taken advantage of by an untrustworthy contractor.
Determine the purpose of the property
Are you planning to renovate and sell the property or are you planning on renting the unit out?
Each option is quite different than the other. When you have an income producing rental property, you must be prepared to deal with after hour calls, property maintenance and last but not least, always have an emergency fund ready in case there are unexpected damages in the property. There will be times something needs to be fixed immediately which will have to be covered by you the owner before the rent is due so the emergency fund is required.
Are you investing solo or partnering up?
If you fly solo, then you only have to worry about your own decisions. But if you decide to have a partner, choose wisely. Make sure your co-investor is someone you trust and that you feel comfortable with the terms of the partnership agreement regarding the purchase and management of the property. Also, choose a partner that has the same vision for the property as you do to avoid uncomfortable situations in the future.
Location, Location, Location
Take a tour around the areas where you are considering buying and imagine how it would be like living in the area for the person who rents or buys from you. Ask yourself the following questions:
- Is it a safe neighborhood?
- Are there employment opportunities nearby?
- Are there entertainment options close by?
- Are there any supermarkets or pharmacies?
- Are there any schools nearby? (If you have a property suitable for families)
- Are there any parks or gyms around?
- Are the amenities in good condition? Would you use them? (In the case of apartment complexes)
These are just some aspects that could determine your future buyer or tenant’s choice. Remember an exciting and attractive location raises your selling or renting chances.
Watch out for the future developments in the area
While your touring the area check for future developments. Do these developments have a positive or negative impact on your property? Is it an area with high growth or a declining one? Are there any vacancies around the area or not? If so, how many
Learn about the property tax laws and fees
Property taxes are something you will have to pay and are unavoidable unless a property tax exemption is in place. Always investigate the property tax laws and the current market value assessments. This is an important step especially when you are purchasing properties abroad.
Once you have narrowed down your search and have selected a few properties compare the appreciation potential and projected cash flow. If you have any doubts regarding this matter, you can always contact real estate professionals for guidance towards the best deals in the market.