Real estate is one of the most popular ways to invest money and see a substantial return. It’s a more hands-on approach to investing when compared to other ventures, like the stock market.
With that being said, there are important rules and regulations you’ll want to follow if you’re thinking about renting out your home or hiring a team for property management in San Diego to do the work for you.
To make things as simple as possible, Penny Realty has insider tips for those curious about investing in real estate. Apply our clever and helpful tips to make the entire transition into investing that much easier!
Be Aware of Upfront Costs
Real estate is not a small investment. A property might be expensive to buy outright, but if you already have the cash or you’re prepared to apply for a loan, it can be worthwhile. However, it's not as straightforward as simply buying a house and waiting for it to earn money.
Routine upkeep, yearly maintenance, improvements, and costs like electricity and taxes are all factors to consider. If you plan to rent out the property, you’ll also have to think about advertising costs and background checks for potential tenants. Before you dive in, make sure you understand what you're financially getting yourself into.
Become a Neighborhood Expert
Location is essential when it comes to property investment. You wouldn't want to invest in a neighborhood simply because it's cheap. As the old saying goes in real estate, nothing beats “location, location, location!”
Consider the market value, the surrounding area, and what the property has to offer as part of your due diligence to yourself and future tenants.
Study the competition to see whether the house you've picked is in a good location for its intended use. Assess the neighborhood, proximity to top places such as grocery stores and coffee shops, and school districts before buying a property to rent out.
You can also study the local demographics. If an area is located in a great school district and it’s filled with lots of young families, you’re more likely to fetch a great rental rate with a three-bedroom, two-bath home than you might with a one-bedroom studio or guest house.
Don’t Do It Alone
There are a lot of moving parts when it comes to owning an investment property. Depending on specific homeowners association rules or city regulations, you may be limited in what you could do with the home.
With this in mind, create a list of referrals and people you feel comfortable teaming up with to help you out.
This can include firms for property management in San Diego, attorneys, CPAs, real estate agents, loan officers, commercial real estate syndication and other investors. You’ll also want contacts for inspectors, appraisers, electricians, plumbers, pest control, and more. These people can help you keep the property in good shape throughout the coming years.
Set Specific Terms
After you've decided on a property type, whether it’s a single-family home or a multi-family complex, you can negotiate the terms of your investment. To keep a detailed budget, estimate your rent, taxes, monthly fees, and emergency reserves.
Will utilities be included in the rental price, and if so, which ones? Many investors cover water and gas while having the tenant pay for heat and electricity.
Are you going to allow pets? If so, consider charging a pet fee, whether it’s a monthly cost or a one-time fee.
You may also want to charge for use of a garage or workshop. If you plan to invest in a property type that’s more similar to an apartment building, employing a property management team can take a lot off of your plate.
Weigh your options ahead of time to prevent unnecessary stress and expenses down the road.
When someone gets involved in investing, they often expect a quick return on their investment. Similar to the stock market, investing in real estate can take time, and seeing the investment pay off isn’t an overnight venture.
Patience is one of the most necessary, yet challenging parts of investing in real estate. Try to keep your expectations in check! Bold decisions can result in huge profits, but they can also hurt your bottom line if they aren’t backed with careful research.