A lot of people look at those who own and / or operate investment / rental property and wonder, wouldn’t it be great to do it themselves? While some individuals and properties make great sense, others fail! Like most things in life, there are both positive and negative aspects of owning investment property, and you owe it to yourself to fully consider, with your eyes wide open, some of the many factors and considerations involved. . With that in mind, this article will attempt to briefly, examine, examine, and discuss some of these variables and considerations.
1. Comparisons / Competitors, Opportunity Costs, Uses for Your Money: Does buying and owning a particular property maximize your possibilities and return on investment compared to other alternatives and uses? In other words, will it provide you with the most bang for your buck? When considering a real estate investment, start by fully assessing not only the initial purchase price, but also the amount that will be needed, both in the short term and in the long term! Take the purchase price, plus the most immediate (first 2 years of ownership) costs incurred and involved. Next, consider and use advance rents (look at the local market and the competition, and use a figure of 80%, which means four-fifths of that number, to see your rate of return). Look for a minimum rate of return of 6% (for example, if the purchase of the property plus the short-term price is $ 500,000, your full rent should be around $ 37,000, so your figure of 80% is d. ‘about $ 30,000 or 6% of the cost). Also, compare that to the opportunity – the costs, bang for your buck or what you could possibly receive from other investment vehicles).
2. Reserves: We suggest you use the 80% figure, so that you are ready for vacation etc. etc.
3. Cash, Against Mortgage / Loans: Most buy these smaller investment properties, with the help and assistance of getting a mortgage. Be prepared, to have enough rents and reserves, to pay your monthly expenses, including mortgage interest and principal, property taxes, insurance, homeowner paid, utilities, etc.
4. Tenants and Rents Charged: Consider your tenants carefully, and look for tenants who are reliable, reliable, with good credit, etc. There are different philosophies, and some landlords proceed, chasing the highest rents possible, seeming to be willing to wait, until they guarantee that. However, this philosophy may or may not provide maximum rents, and the risk is to prolong vacancy periods. The other approach, is the one, I personally believe, and that I follow, in the properties that I own and / or manage personally, is to seek rents, in the middle of the pack, to provide maximum service to tenants and to maintain / maintain quality. tenants, for periods much longer than the usual periods. Know your personal risk / reward tolerance and philosophy from the start!
Is owning rental housing a good option for you? Know what you are looking for and what you can afford, as well as your risk / reward tolerance!
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