If you are new to real estate investing, there are some things to consider when buying an investment property.
First - Consider the location of the property. Is the property in a desirable part of town? Is it an area with with many tenant opportunities? Is it near public transportation? The area will also determine what the property can rent for. Be sure to look at what neighboring properties are renting for and note their condition.
Property Due Diligence -
Repairs : what repairs will you need to make in order to make the property rentable? If you are used to flipping, there are different repairs that will be necessary if you are now planning on renting. Such as being able to get away with not including some appliances when flipping, but needing to provide those to make tenants choose your property over others available. What repairs are necessary for health and safety of your tenants and to limit your liability as the owner?
Holding Costs : what will insurance, taxes, vacancy, utilities, etc cost you over time? What will you need to reserve for any repairs?
Financing : what financing are you able to get? how much will you be required to put down? and after all of that, will the property cash flow. Not only will you want your investment to cash flow, but your lender will feel more comfortable providing financing to you if your investment “pays for itself”. Hopefully in addition to the monthly cash flow, your property will appreciate over time. This will allow you to sell for a profit on top of it generating monthly cash flow to you over time.
You will hear us preach this time and time again. But money is made on the buy. Make sure you do not get excited about a seller, wholesaler or agent’s sexy numbers of what you can rent a property for. Be sure you do not overpay for the property.
Be a good landlord - if you can keep tenants in the property for long periods of time rather than needing to get new tenants constantly, it will make your life and your wallet better.
TABS provides financing to landlords in Colorado. And our management team has been a landlord - we are happy to counsel you if you are just getting started.