1. Should I flip the property or rent it long-term?
House flipping has become increasingly popular over the past few years. There are a number of reality shows that may contribute to this popularity. However, there are also still a lot of great Real Estate deals in the current market. If you choose to flip the home, you need to do it in the shortest period of time possible to gain the maximum profit. As a general rule, the less time you own the property, the better the profit.
“Buy and hold” Real Estate investing has been around longer than house flipping and is a steadier form of cash flow. If you are considering long term Real Estate investing, the monthly costs of the mortgage payment, taxes, utilities, HOA fees, and maintenance need to be less than the rent amount to ensure cash flow.
2. What is the demand for renters in the area?
If you want to invest in buy and hold property, you need to know the demand for renters in the area. Even if you find a great deal on an investment property, it won’t matter unless you can find someone to live there. Look at other rentals in the area and whether they are being filled. Areas that have a high percentage of condominiums, townhomes, and apartments will generally have a high rental demand.
3. What is the local market like?
Even if home values are increasing nationally, they may not be increasing equally in your local market. In some areas, home values have declined. It’s best to discuss the market with a knowledgeable Real Estate professional and do your research. Also, know what the local property taxes are. For investors, property taxes are a fixed cost that can affect whether or not you will turn a profit.
4. Should I manage the property or hire a property management company?
The answer to this question depends on how much time you have and whether it’s financially worth it to hire someone else to spend that time managing the property instead. Do you want to deal with finding and keeping tenants? Are you able to do maintenance and repairs on the property when needed? Are you close enough in proximity to the property to manage it? Property management companies generally charge 7-10% of the monthly rent and sometimes the first month’s rent. If you can still make a profit using a property management company, it might be worth it to avoid the hassle that can sometimes come along with finding and managing tenants.
5. Am I familiar with the laws and regulations of investing?
Always consult an attorney when deciding to invest in Real Estate. It’s essential that you have a proper knowledge of the laws and regulations and follow them accordingly before becoming an investor.