Are you looking to start your investment portfolio with real estate?
Small scale Real Estate investors are just as concerned about today’s market as home buyers. They’re facing the same high prices, even trying to get off-market properties.
48% of individual real estate investors see the investment market today as being worse or much worse than it was a year ago, according to a survey completed by RealtyTrac.
Even flipping homes is down compared to previous years because of much lower profit margins. Don’t let HGTV fool you. Flipping homes is not the game it was a few years ago with the housing prices where they are.
Distressed homes have had a great opportunity to sell this year for top dollar because of how desperate home buyers have become. As a result, it gave typical fix and flip investors less opportunity to purchase at a steal in order to renovate and resell for a profit.
On top of that, the cost of materials and labor is so incredibly high for home improvements, and that’s if you can find good hardworking contractors that are available.
Tips for purchasing investment property
If you’re an investor looking to purchase at this time, here are some great tips from seasoned investor, Mindy Jensen with some of my own experience.
- Avoid condos, townhouses, and homes in strict HOA neighborhoods or neighborhoods that have high association fees. It’s important to stay in control of your expenses and with association fees, they can go up year over year and even have unforeseen assessments come into the mix.
- One of the biggest mistakes people make when it comes to investing in real estate is not running the numbers and making sure there is enough left over for a decent return on their investment. You better make sure to have a large reserve fund or be able to cash flow repairs and mortgage payments, because when or if things go south quickly, you want to make sure it’s well funded. Just look at what 2020 did to investment properties across the country.
- Don’t fall in love with a property! Remember, you’re not living in the home. It’s about the numbers. If they don’t work, don’t buy it. It doesn’t matter how perfect and upgraded you think it is. You have a budget and an ROI you need to focus on. There will be other properties, so just take a deep breath and keep on the search.
- When choosing a property, remember that the market can change at any second. Be able to pivot quickly and adapt so you don’t lose money. Make sure the property has more than one way to make you money.
- NEVER buy weird. Weird, unique, unusual are not adjectives you want in an investment property. You want normal, traditional, interesting-but-ordinary when you are buying a house. You have to think of your tenant or long-term or end goal in this investment
- Probably one of the most asked questions in real estate is “how do I get started if I don’t have the capital to make such a large investment”
If you want to get started investing without a lot of money, you’re starting from a weak position. You have to keep in mind emergency repairs, covering the mortgage if your tenant doesn’t pay or the time in between finding tenants.
How to start buying investment property when you can't pay cash
Even if you don’t have money to start purchasing homes, the best way to start is purchasing a home for yourself where you can gain extra income by renting out a room, AirBnBing your home and staying with a relative a week or so out of the month, or pay down enough of your home and save to purchase another home with a tenant in place for your first home.
Really great advice from Mindy: “There are other ways around not having capital like partnering with someone who does have the money. If you go this route, make sure to get everything in writing before you enter the partnership. Everyone is friends before the deal, but not always friends afterward. Write up the “rules” of the investment/partnership while everyone is still friendly.”
My unofficial goal is to purchase a property every year, but I’ll tell you that even being in real estate, finding a good deal this year has been a challenge. When we do, we’re up against multiple offers just like everyone else. Don’t give up, just be patient for the right property that matches your investment goals. If you jump too quick on something without doing your due diligence, it may cost you more than you were willing to really pay for it.
For more questions on the market information in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.