Due to the ever-growing inflation rates, by the time the investor has paid off the initial value of their property they bought 10 or 20 years ago, the value is more than likely to have doubled or even tripled in some cases.
However, before buying your first property for investment, there are certain steps you must take to ensure a higher ROI and help mitigate any associated risks.
Here’s what you must do:
Get Professional Property Inspections:
The first step you need to take when you have identified a potential property for investment is to get a home inspection. This will highlight any red flags of the property that indicate an issue that must be addressed. A property inspection can save thousands of dollars in costly renovations and repairs for issues such as damaged or structurally compromised roof or walls, mold in the basement that needs to be dealt with, etc.
Order A Property Appraisal:
Property appraisals are vital as they can help you determine the current value of the house. They are also helpful in analyzing the past value, which can make it easier to predict the future value of the property. By ordering a property appraisal, you aren’t left guessing what the property is worth and can have a good indication if it is worth investing. It will also give you a better idea of how much rent you should charge from your tenants!
Verify Rents Before Closing Escrow:
Whether you have bought a property for rent or to flip and sell, it is always a good strategy to talk to the property manager before making a final decision. With the changing economy, the sellers’ market might not always be profitable, and you could be forced to put the property up for rent.
By talking to the manager beforehand, you can verify how much rent the property can generate on a monthly basis. Compare the expected rent with the estimated monthly costs to get a clear idea of how much cash flow you can receive from the property.
Make Sure You Have Sufficient Money Reserves:
Even during the best economic times, it can be tough to find quality tenants and the property can stay vacant for a long time. Make sure you have enough money reserves to cover at least six months of rent per property to avoid going under if the real estate market takes a dip.
By having sufficient money reserves, you can also avoid defaulting on loans as well as have the necessary funds for any unexpected repairs or additional costs.
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Get in touch with Eleanor Curry today and boost your commercial real estate portfolio with smart investments!