Are you considering diversifying your investment portfolio and adding some real estate assets? You must have heard about the benefits and advantages of investing in property.
Provided you have the ideal property in a strong market, you can be assured of steady returns, good returns, tax advantages, and a good absorber of economic shocks. The property industry is quite a dynamic one and involves several elements of society and the economy.
Our team at State Property Management LLC has written this article to help you learn the basic tips for investing in real estate so that you can achieve success in the real estate industry.
Keep reading to learn more!
Investing in Single-Family Homes
As a rule of thumb, new investments in the real estate market are advised to invest in single-family homes. This consideration for single-family residences is based on their low-risk nature.
Such property always has a market in any area as most of them are located in either HOA developments or in good school districts, offering security and proximity to services. In addition, the amount of effort that you would need to put in concerning management will be minimal.
Compare this to a multi-unit development. While the rental income might be higher and even possibly the return, you will need to be on top of your game when it comes to marketing, accounting, and maintenance of the property.
In addition, taxes are an important part to consider. Compared to commercial and multi-family residences, single-family homes have one of the lowest tax rates.
Now, let’s take into account the quality of the tenant. While you should be concerned about getting rental income as fast as possible, you also need to consider the type of tenant. It is crucial that you implement tenant screening to select the best qualified tenant for your rental.
With more units to fill, one can be overwhelmed with how to go about things. Such a scenario will increase the possibility of you making mistakes. With a single-family residence, you can easily begin your journey and know the ins and outs of investing and property management.
Consider Short-Term Rentals
With the world now considered a global village, there are various applications that allow an investor to venture into property easily.
Short-term rentals allow a property owner to make significantly higher profits than with a long-term lease in place. However, they do come with their own risk especially during the low or off-season.
We recommend that you properly set up your leases to take proper advantage of both worlds. You could lease out your property long-term during the low season and capitalize on the higher returns from a short-term rental during the peak season.
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However, if your local area is a vibrant tourist destination with guests coming all year round, consider going full-time into short-term renting.
Vacation rentals have been competing steadily with traditional hoteling options for over a decade now. With the ideal property, unique fittings, and appropriate pricing, you could gain a higher return on investment.
Buy-and-Hold
This is one strategy that has served hundreds of beginner property investors well. As the name suggests, an investor would buy real estate and possess it over several years.
During this time, the value of the property would appreciate significantly. When the time is right, the owner will sell the property and leave the rental market.
First and foremost, you need to select a property whose market price is significantly way below the average. It might be a property in a new and upcoming area where demand will rise over the years. Most importantly, you should conduct a thorough research market report on the current and future performance before buying a property.
Secondly, rent out the property. During the holding period, the property should not be vacant but rented out. This will not only maximize your income but also help your property get appreciated over the years before you decide to sell it.
Fixing and Flipping Houses
Of all the strategies mentioned in this article, fixing and flipping might be the most challenging one. It involves purchasing properties in poor condition or one that is underperforming. The price of purchase will be significantly below market price because of the condition.
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Once purchased, you would make the necessary repairs and renovations to the property. You would then sell it at near or above market value enjoying a good profit.
The benefit of this strategy is that it allows you to make a profit within a short holding period and you wouldn’t have to worry about management.
Conclusion
Real estate has been tested for several decades as an investment asset and it has performed steadily. Compared to other financial assets such as stocks, financial vehicles, and bonds, you can be assured of steady passive income, appreciation in property value, and several tax advantages.
Property investing is not just about selecting the ideal property, it’s also about management. As pointed out above, you must be ready to respond to your tenant’s request and make necessary changes to your property over time.
If you are considering Central Florida as your ideal location, rely on the professional services of State Property Management LLC. We are the leading service providers in the area known for our expert and comprehensive services.
Our experts manage a wide range of properties from single-family homes to apartments to HOAs. Get in touch with us today and receive a quote for our services!