If you are considering purchasing investment property, there are some tips that you should consider in the process. For the average person, this type of property comes in basically two forms. One is the purchase of property for resale, and the second is the purchase of property for the purpose of being an income property.
When talking about property for resale, we are talking about a relative quick turnaround from the time the property is purchased and the time it is resold. Another term for this manner of transaction is “flipping” the property.
Flipping an Investment Property
When buying real estate for the purpose of selling it for a profit, in most instances there is quite a lot of refurbishing that needs to be done. This has to be well planned and coordinated, and well thought out prior to the actual purchase of the property.
The amount of the purchase price, and the cost of refurbishing the property has to be built into the ultimate sales price you feel you can achieve when the house is eventually sold. So you will have to do your homework and get valid comparable pricing on similar properties in the area.
You will have to learn what is popular as far as accessories and style in the area as well, and then when you have the house fixed up structurally like you want it, you will have to “stage” the house so that it will be attractive to buyers.
Of course if you are going to sell it yourself, you will save the real estate commissions, but then you can build that into your price too.
When it comes to purchasing property for income purposes you should do your calculations very carefully. This can get a bit tricky as you will want your initial rent that you are charging to be competitive with the area, or just a little under, and you will want the house to be just a bit nicer than local rentals.
You can make a good living just buying houses, fixing them up and renting them, but the secret is to find good tenets who will take care of your property. One way is to charge a little lower rent, but ask for a higher deposit to offset any damage that might occur.
You will also need to establish a reserve fund of money in order to have cash available for repairs. It is a given that a toilet will need replacing, the furnace will need repairs along the line, and that other items will come up.
It is also a given that when a family lives in a house that is not theirs, the house will probably have more wear and tear than normal. The trick to owning income producing investment property is that you get good people who will take care of your property, and that you have good communications with them, so that when something does need repair, you know about it right away.