Are
you thinking about investing
in real estate in 2024 ? Are you considering buying a property and flipping it? Have you ever done this before? Investing in Real Estate sounds good, right? Looks easy, but is it? You'll need to think carefully about what, where, how much you can afford. You will need to pay close attention to market comps. You will to calculate the cost to upgrade and or fix up the property before putting it on the market or renting it out. You will need to calculate what your projected return on investment can be, before you jump into investing in a property. This is now more important than ever.
Investing in property is the single biggest financial transaction
that you will ever undertake and should always be done with great care.
There’s more to consider than you think. For starters, investing in real estate
is an active, rather than a passive investment and comes with financial
risk.
Although, buying your own home or an investment property should first and foremost be about securing your future and creating a foundation upon which to build a life and future for yourself and your family, you should also make sure that you are a making a sound investment. These tips and insights are especially important in the environment we are in today, with uncertainty in the global economy, with home prices at historically high levels and higher mortgage interest rates.
This is part of our best in class continuing series of articles by Nick Santoro and Joe Santoro of Personal Property Managers, who service Pennsylvania and New Jersey and specialize in real estate, property management, home content downsizing and estate sale services.
Before you begin….Do your homework (top 8 tips)
Whether it is your primary home or a second property such as a rental you should always do your homework thoroughly to mitigate potential risk. We always recommend that you reverse engineer the purchase price and the cost of upgrades and repairs. Pay close attention to your costs and projections and always factor in that things will inevitably cost more than you thought and the time it takes to do any work will probably take longer than you projected. If you are investing in a property, always make sure that there is enough meat on the bone to make a profit when all is said and done. Don't forget to factor in permits, costs of materials, labor costs, insurance, utilities, taxes, unexpected cost overruns and Real Estate commissions and related fees.
Consider the potential downside right upfront. When the market turns for example, you may find yourself in a tight financial spot if you have to sell. Think about this when you buy: how difficult and how long will it take to sell the property and what the market comps are, especially within the past six months in the geographic area your property is located.
Consider whether you have the time and financial means for this type of investment. If you are purely looking for an investment, then you will really want to get a good understanding of repair costs and contractor cost. If you are not hands on or handy then repair and upgrade costs can really skyrocket. Consider location; your location to the property you are thinking about investing in. How quickly can you get to the proprety if there is an issue. This is especially true for rental properties. If you are not handy or do not have the time to devote to a project or must delegate work to others such as contractors or other paid labor then your cost will rise substantially and your profits will erode quickly.
Once you have decided that you are going to take the step and invest in bricks and mortar, be sure to keep these 8 golden rules in mind:
1. Location, location, location – this old adage will always be the primary driver of demand; price and property values. Research, research, research. Before you sign on the dotted line, chat with local area agents and get the vital statistics and information about the area. Location and ammenities are keys to success, be it a flip or a rental.
2. Pay a fair price - do not pay more than fair market value unless you are sure that you are financially secure enough to hold onto the property until it starts to accumulate value. Price growth tends to track economic growth quite closely, so if the economy stalls, so do prices. Remember that you only have one time to buy right, and that's right from the begining. If you overpay for a property is is extremently difficult to come close to making a profit or breaking even because repair and fix up cost are what they are and just keep going up. All the money and profit is made in the very begining, at the purchase price.
3. Neighborhood – do a thorough due diligence on the neighborhood and area where the property is located, especially if you are not familiar with the area. Make sure that it is a viable area, more so if you are looking at a second or investment property. Ensure there are good services, roads and communications connectivity for aspects such as internet and satellite television for example. Take a look at market comps and how long homes tend to stay on the market when listed for sale.
4. Street savvy – don’t stop with the neighborhood, also check out the street (or complex) to ensure you are buying in the right part of the suburb. Be sure to check out the prices on your road (or complex) to compare that you are not paying more. Guard against paying a high price for an overcapitalized home.
5. Facilities and amenities – the better the facilities and amenities in the area, the more in demand the property is likely to be when it comes to either selling or renting it out. A good transport network is important, as are schools and then secondary facilities such as shops and other services.
6. Security – this has become an important consideration for neighborhoods and complexes. The more secure the property and area, the more attractive it is for buyers and tenants. Check out whether there is a neighborhood watch or similar group and ensure that the property itself is adequately secured and insured.
7. Capital value growth and yields – you obviously want to invest in an area where property values grow at least in line with the market average, preferably at an above average rate. If you are investing in a rental or a house flip then you will want to check out the returns in the area as it is important to budget for any shortfalls. Don't forget to factor in the higher mortgage rates that are now in place, plus insurance for the property, property taxes and utilities. Ensure also that you build fat into your budget for all the hidden costs associated with any property purchases or upgrades. For example: A roof replacement can cost in the $12,000 and up range. A kitchen can cost in the $25,000 and up range. A bathroom can cost in the $10,000 and up range. Exterior siding can cost in the $15,000 and up range. A basement can cost in the $15,000 and up range. Of course all costs are dependent upon house size, material cost, labor cost, quality of replacement items and more. This is why it is important to due your research and factor in as much as you can to determine if your purchase price combined with renovation costs will bring the return on investment you were hoping for.
8. Leisure and attractions – if you are thinking about investing in a holiday rental, then leisure facilities and attractions are important. The closer the property is situated to attractions such as the beach, river or game reserve for example, the more in demand it will be. Consider who your tenants will be and put yourself in their shoes. Where do they want to stay when they book for a holiday for example?
More information can be found on who we are and lessons for home selling experts via these brief video links
We offer 6 primary services to help families or executors. They are:
Additional info can be found on this brief 90 second video or a full array of great tips and insights and video by clicking on our resource page.
For more insights, tips and videos please visit our Resource Page in the About us tab.
For more information on real estate or home downsizing please contact Nick Santoro or Joe Santoro of Personal Property Managers at 215-485-9272 or 908-368-1909. Personal Property Managers specializes in helping home owners transition from their home of many years into a new community. Personal Property Managers services Pennsylvania and New Jersey and offers downsizing services, estate sales services, home staging, discount full service real estate services via its association with EveryHome Realty. Learn more about Personal Property Managers from our recent News Stories.
