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1/ Going through the process of investing in first real estate property with family this month
didn't really know ANYTHING about how this worked until a few weeks ago.
Here are some of the most interesting takeaways so far...
didn't really know ANYTHING about how this worked until a few weeks ago.
Here are some of the most interesting takeaways so far...
2/ Leverage is key. try to get as much of the upfront costs (closing, small maintenance projects, etc.) bundled into the price as possible
This limits your upfront cash outlay tremendously
This limits your upfront cash outlay tremendously
3/ you can actually make $$ (on a rental property) in a few ways:
- appreciation
- tax savings
- cash flow
- loan leverage
- appreciation
- tax savings
- cash flow
- loan leverage
4) You can use the Loan to Value ratio to better model out if/when you could ever refinance and pull $$ out of the property https://www.investopedia.com/terms/l/loantovalue.asp
as the process continues will keep adding new learnings, especially during closing and the first few months of actually figuring out wtf is going on
5) another super basic thing when deciding where to look:
you can use Zillow to see the appreciation of property prices in a specific neighborhood over time
Past performance != future returns, but a useful proxy to understand where in a city people are headed
you can use Zillow to see the appreciation of property prices in a specific neighborhood over time
Past performance != future returns, but a useful proxy to understand where in a city people are headed
6) when modeling out the returns of a property, consider multiple scenarios
- what happens if I can't find a renter?
- can I afford to cover any gaps in the mortgage payment?
- how fast are rents increasing in this area?
- what happens if I can't find a renter?
- can I afford to cover any gaps in the mortgage payment?
- how fast are rents increasing in this area?
7) understanding any upfront maintenance costs immediately. ideally you negotiate and have the seller or HOA pay for this
- pest control?
- heating/cooling units?
- is each BR rentable w/ current appliances/furniture?
- pest control?
- heating/cooling units?
- is each BR rentable w/ current appliances/furniture?
8) Look at how well maintained the building is (if buying a condo/apartment)
This will signal an effective or incompetent HOA
- how are common spaces maintained?
- anything new in these spaces?
- paint peeling everywhere?
- lighting/cleanliness in hallways?
This will signal an effective or incompetent HOA
- how are common spaces maintained?
- anything new in these spaces?
- paint peeling everywhere?
- lighting/cleanliness in hallways?
9) Walk/drive the neighborhood extensively
If it's in an up-and coming area, how can you tell? How far away are any new buildings or new retail? Are the cars (mostly in a city) parked on the street well maintained?
You can tell a lot by looking at how ppl maintain their space
If it's in an up-and coming area, how can you tell? How far away are any new buildings or new retail? Are the cars (mostly in a city) parked on the street well maintained?
You can tell a lot by looking at how ppl maintain their space
10) try and look for what might be a cost effective easy improvement that would immediately improve the value of your property
- could you add/remove carpet in specific areas?
- can you install newer toilets or shower heads?
- if there's no central AC, is it easy to install?
- could you add/remove carpet in specific areas?
- can you install newer toilets or shower heads?
- if there's no central AC, is it easy to install?
