Real Estate

Is investing in Real Estate right for you?


Have you ever thought about investing in Real Estate?  Real Estate is a great investment and makes sense for the right investor.

A few days ago I received a phone call from a young woman I sold a home to earlier this year.  She and her fiance are interested in buying their first rental house and she was looking for some guidance.  This is some of the advise I gave her-

  1. Are you ready to become a landlord?  Are you going to search for and screen your tenants and be available by phone at 2:00 am when the air conditioner goes out (because it’s always the middle of the hottest night in August when that happens!  LOL).  Or would you prefer to hire a management company to handle all of that for you?
  2. How are your finances?  If you need a mortgage to purchase the property your lender will ask for a higher down payment (at least 20%) and your interest rate will be higher than for your primary residence.  Lenders are taking a bigger risk on homes that are not your primary residence.
  3. Select the right home.  How much work does the property need before it’s ready to rent?  Can you tackle the job yourself or do you need to hire help?  Is it located in an area tenants want to be such as near shopping and schools with good interstate access?
  4. Understand your expenses.  You will have to pay the mortgage, property taxes, insurance and maintenance on the home.  There may be other expenses depending upon the home, such as HOA fees and management fees if you elect to hire someone to take care of the property for you.
  5. Determine your potential profit.  After all of your expenses have been paid and a small amount set aside in cash reserves to cover replacement of that air conditioner along with vacant times between tenants,  how much will be left for your profit?  Aim for at least a 6% and closer to 10%.
  6. What is your budget?  After carefully considering all of the above points, how much are you willing to invest in your rental home?

We met again a couple of days after our initial consultation, reviewed the numbers and are scheduled to look at our first property early next week.

Kelly Harden, Realtor®

Mihara & Associates, Inc.