Provided By Guest Blogger: Michael Longsdon
If you have some money you want to invest, real estate is a great option. It’s a good way to make passive income, but that doesn’t mean you won’t run into any snags along the way. However, knowing what to expect and how to be the best landlord possible can help make the process go more smoothly until you become an expert yourself. Here’s a quick guide detailing what you should know, brought to you courtesy of the Sarah Bernard Realty Team.
Decide Whether You’re Interested in Commercial or Residential Real Estate
Before you put any money down on a property, you need to decide whether you’d like to get involved in commercial or residential real estate. Both options have pros and cons, so it’s up to you to figure out which type works best for your specific wants and needs.
Commercial real estate includes storefronts, office buildings, and any property that houses a business. It’s generally more expensive to get into commercial real estate, but the payoff may be bigger in the long run. Many investors choose to purchase shares in a trust with other investors to reduce upfront costs.
Residential real estate, on the other hand, includes homes, apartments, and anywhere tenants reside. Most residential investors spend less upfront, but they may also get less return on investment unless they purchase multiple properties.
Research the Area in Which You’re Considering a Purchase
Whether you’re going to invest in residential or commercial properties, it’s important to look into the area you’re considering before you pull the trigger. This helps you decide how much you need to spend and how quickly homes or buildings are moving in the region. Look for an ideal location to purchase an investment property, such as an area where many vacationers flock to.
Line Up Your Financing
Securing financing for your investment property should be completed before you begin looking. This gives you the chance to determine a budget and start saving if necessary. Your best bet is to stop by a bank or contact your financial advisor to figure out how much you’ll need for a down payment since you can’t use mortgage insurance for an investment property.
Don’t forget to include other expenses when planning your budget, including insurance, taxes, maintenance and repair costs, and utilities. While you may not want to finance those items, it’s a good idea to include them when deliberating how much it will cost to invest.
If you’re considering purchasing an investment property, you may want to create an LLC to protect your assets in case of any litigation against you. You can simplify the process of starting an LLC in Missouri by working with a formation service.
Learn How to Be a Good Landlord
Both commercial and residential real estate require property management. While you can outsource it and hire a company to take on the process for you, it’s wise to understand how to be a competent landlord in case you decide to handle it on your own. Some states and cities offer their own training or programs on how to be a good landlord.
Some classes are free, while others may require a fee. Either way, you’ll learn from experts about your state’s laws regarding landlords and tenants, as well as best practices for screening applications, running background checks, handling deposits, and other functions.
Consider making some home upgrades so your home is more appealing to renters. For example, if you’re looking to attract tenants with kids, parents will appreciate having a fenced-in property. To find reliable fencing companies, visit sites that provide detailed reviews from past customers. Before working with a fencing company, make sure they’re aware of any underground power lines.
Purchasing your first investment property is an exciting time, and you are more likely to be successful if you’re prepared for the process and know what you want.
Finding a home in St. Louis can be overwhelming, so let the Sarah Bernard Realty Team help you find the property that fits your lifestyle. Get in touch by calling 314-780-9070.