When searching for the right rental property, it can be easy to get swept away by what seems like a “great deal.” But before moving forward and signing on the dotted line, it is essential to keep in mind that real estate is oftentimes a long-term investment.
In addition, just as with any other type of investment that you would obtain, you will want to ensure that your goals for this endeavor will be met. With that in mind, there are three things that you should consider when evaluating a property for purchase.
Certainly, one of the primary reasons that investors get into rental real estate is for the incoming cash flow that it can provide. In order to secure a property, though, it will usually require that you take money out of your present liquid assets such as stocks, bonds, CDs, or mutual funds. You will then be placing those funds into an asset that is far less liquid. Therefore, you will need to be sure that moving forward with the purchase, based on the projected rental amount that you can charge, the property will pay a fair cash-on-cash return.
Any type of real estate purchase can involve some risk. But, like any other investing situation, some properties may be more risky than others. Given that, be sure that the property you are considering is not going to pose too much risk. This can include performing the proper due diligence before you purchase, as well as reviewing the likely return potential going forward.
For example, buying a fixer-upper may at first glance appear to offer a nice return. But, after you factor in the time and expense to repair it – while it is not generating you any cash flow – you may find that going with a nice, simple established cash flowing property may be the better option.
Time Spent Managing
You may also find that some properties will require you to spend an inordinate amount of time managing them. From maintenance to rent collection to day-to-day tenant dealings, you could be running in circles – when you could instead hand over the daily management requirements to a property manager.
In doing so, you will still be able to attain the property’s income producing benefits, and you may also find that you will have much more time to focus on other priorities. For more information on how a property manager can help to keep your real estate investments great, Contact Us.