With the Boston property market on the rebound, many - perhaps you're one of them, are contemplating on investing in a property and catch the mortgage wave while it's still low enough to mount. And with Boston having one of the highest returns in rental properties, be it condominiums or single-detach homes, investing now is indeed a lucrative business to be in.
But before taking that big step of buying an investment property, here are 10 tips that should help you tip the scale towards becoming a landlord.
1) Get Down and Dirty - Before buying a property, try to think about how much you want to get dirty. If you have a knack for managing construction work and contractors, consider investing in a fixer-upper and renovate it, and then it's your choice whether to flip it or rent it out to the hundreds of thousands of students looking for housing.
2) Relax and Let It Roll - Don't fret if you're not the fixer-upper kind, there are companies out there that do the fixing, leasing, and maintaining for you. Termed as "turnkey" property investing, you can get a fixer-upper and seek out the services of companies like HomeVestors, Professionals Invest USA Network, MACK Co to liven up the property and list and fill it out for you.
3) The Early Bird Remodel - Before even going to the bank, tour your prospective property with a general contractor to see how much work needs to be done. Even if this tip will cost you to spend money before your property earns, it will save you from headaches as well as huge disbursements of cash infusion in the long run. One must remember that to make money, you need to spend money.
4) Determine Your Returns - Before you buy, determine whether there is money to be made in your local market. Start by calculating the capitalization rate. A cap rate measures of the rate of return on an investment property based on the expected annual rental income divided by the purchase price. This will ensure that you are actually getting yourself into a profitable business venture.
5) Commuter-friendly - If you're aiming to become a hands-on landlord, finding property that is not only convenient for your tenants but also for you is best. This ensures that if need be, you are able to assist and easily transport yourself to the property's location.
6) Best Buy Deals - An untapped and unheard resource for a while now, short sales are the best way to find a property that's easy on the pocket but great of the portfolio. Enlist a real estate agent who has a good network and relationship with banks, as this will make the process A LOT easier for you. Aside from short sales, also look at foreclosure auctions, probate sales, and estate auctions - these sales activities tend to have good finds.
7) Coughing Up The Cash - Cash is necessary for this type of investment whether you secure financing or not. If you do take out a mortgage, expect to drop at least 20%, as well as a decent credit score. If purchasing a rental, cash reserves of six months' worth of payments on that property. If you need a mortgage, consider a community bank that keeps its loans in-house.
8.) Tenant Tenacity - Once you're all settled in and the paperwork has been completed, securing tenants (if not using the property as a turnkey one) is your next most important step. Being patient in finding good tenants is something that will greatly pay in the long run and will contribute to the longevity of your newly-purchased investment. Remember to never accept a credit report a prospective tenant has printed out and provided himself. Do your own credit and criminal background screenings. Ask for two landlord references. Companies like the National Association of Independent Landlords provide a selection of screening reports, including full background searches for $29.95
9) The LLC Loop - Form a limited liability company (LLC) to hold your investment property; otherwise, your other assets could be at risk should an accident occur. This not only prevents you personally from being hounded incessantly, but also provides a buffer between your relationship with your tenants.
10) Real Estate Reality - If in the end you're not convinced that investing and being a landlord is for you, then there are other alternatives that also make you a viable property investor hence increasing your portfolio. Consider Real Estate Investment Trusts (REITs), they're less risky, and yields are ensured, although they might be a little on the low-end compared to an actual property buy.
For more on these tips, click here to go to Forbes' original article.