There are two ways that I try to make money off of real estate: Holding and Flipping. Today I want to discuss holding. There are many types of properties you can invest in. Office, industrial, land, ground leases, retail, residential... It really just depends on what your risk tolerance is and how much money you have to play with.
For introductory purposes, lets discuss residential properties: Houses, town homes, condos, duplexes. My strategy is simple: Buy cheap, rent high. Of course these types of deals are hard to come by but that doesn't mean they don't exist. I once owned a property that I paid less than $35K for and made $950 a month off of it. Find me a stock that gives you that rate of return and I'll buy the whole lot!
I stay away from condos just because of HOA dues and CAM charges. I just don't care for never ending increases on dues. This doesn't mean that there aren't some great condos out there. Renting condos in the uptown/downtown area are great investments. You make your money's worth in rent and the dues are just minuscule thereafter. I'm super picky so duplexes also get overlooked by me because I like owning the whole shebang. I don't like to know if the neighbor's house burns down... well so does mine. Again, that doesn't mean they aren't great investments. You can find duplexes in the $30-50K range in areas of East Dallas and rent them out for the same amount of money you can lease a house ($950-$1100).
Things to look for when considering investment properties is property value and condition. Money comes very cheap these days with interest rates being at an all time low. This being said, some properties might be worth the premium if you are financing your investments. Just make sure they will appraise and sell for the same or more down the road. If you are paying cash, you definitely want to make sure you are getting the best deal possible. Take a look at what a property is worth on the appraisal website and what the property might have been bought for initially. This helps determine value along with comparable properties that have sold in the area in the past 6 months. If you have a Realtor helping you they can pull this up in the MLS.
When buying an investment property, inspections are not required but I strongly suggest them. You want to make sure you know all the properties deficiencies so you can determine the cost to remedy them. Just like a home you would consider living in, buying a property with foundation, plumbing, or electrical issues might not be worth it. These can get very costly and completely throw off your anticipated returns. Since the purpose of these properties is to hold them and rent them out you need to make sure they are fit for living in. Once it is rented, it is still your home. You are responsible for the repairs and upkeep of the property.
It isn't a wise decision to buy and hold property in your personal name. Form a business entity and invest under that. I prefer a Series LLC. I'm not a financial expert so please don't just go off of my word. Talk to an attorney, financial planner, and your CPA on the best strategies to invest. This is a very detailed conversation and a blog for another day as well.
Well hopefully this spikes some curiosity and gets you thinking about investing in real estate. Next time I'll talk about the actual rental process and how you can get your property leased. There is just so much to discuss about investing that it's hard to do it all in one post and keep someone's interest. It's more like writing a book!
Cheers!
For introductory purposes, lets discuss residential properties: Houses, town homes, condos, duplexes. My strategy is simple: Buy cheap, rent high. Of course these types of deals are hard to come by but that doesn't mean they don't exist. I once owned a property that I paid less than $35K for and made $950 a month off of it. Find me a stock that gives you that rate of return and I'll buy the whole lot!
I stay away from condos just because of HOA dues and CAM charges. I just don't care for never ending increases on dues. This doesn't mean that there aren't some great condos out there. Renting condos in the uptown/downtown area are great investments. You make your money's worth in rent and the dues are just minuscule thereafter. I'm super picky so duplexes also get overlooked by me because I like owning the whole shebang. I don't like to know if the neighbor's house burns down... well so does mine. Again, that doesn't mean they aren't great investments. You can find duplexes in the $30-50K range in areas of East Dallas and rent them out for the same amount of money you can lease a house ($950-$1100).
Things to look for when considering investment properties is property value and condition. Money comes very cheap these days with interest rates being at an all time low. This being said, some properties might be worth the premium if you are financing your investments. Just make sure they will appraise and sell for the same or more down the road. If you are paying cash, you definitely want to make sure you are getting the best deal possible. Take a look at what a property is worth on the appraisal website and what the property might have been bought for initially. This helps determine value along with comparable properties that have sold in the area in the past 6 months. If you have a Realtor helping you they can pull this up in the MLS.
When buying an investment property, inspections are not required but I strongly suggest them. You want to make sure you know all the properties deficiencies so you can determine the cost to remedy them. Just like a home you would consider living in, buying a property with foundation, plumbing, or electrical issues might not be worth it. These can get very costly and completely throw off your anticipated returns. Since the purpose of these properties is to hold them and rent them out you need to make sure they are fit for living in. Once it is rented, it is still your home. You are responsible for the repairs and upkeep of the property.
It isn't a wise decision to buy and hold property in your personal name. Form a business entity and invest under that. I prefer a Series LLC. I'm not a financial expert so please don't just go off of my word. Talk to an attorney, financial planner, and your CPA on the best strategies to invest. This is a very detailed conversation and a blog for another day as well.
Well hopefully this spikes some curiosity and gets you thinking about investing in real estate. Next time I'll talk about the actual rental process and how you can get your property leased. There is just so much to discuss about investing that it's hard to do it all in one post and keep someone's interest. It's more like writing a book!
Cheers!
Bina S Beechum
