Real estate investing can be a great way to build wealth, but it's not for the faint of heart. It takes guts, gumption, and a lot of research to succeed in the world of property flipping and rental management. As the housing market has cooled from the highs of 2022, I have started taking calls from investors looking how to find homes that could be prime for opportunity to purchase for rentals and remodeling. If you are one of those aspiring investors, don’t worry, because I'm here to help guide you through the ins-and-outs of real estate investing.
Location, Location, Location
First things first - let's talk about location. You know the drill – it's the most important factor in real estate, but what exactly makes a location a good investment? For starters, you want to look for areas with current and potential job growth. A thriving economy means more people will be looking to rent or buy in the area, which is good news for your bank account. Proximity to schools, hospitals, and public transportation are also big draws for potential tenants and buyers.
Don’t just take my word for it – do your own research and see what the data says - and don't be afraid to go against the grain – sometimes the up-and-coming neighborhoods can be the most profitable investments. Just be sure to get a good sense of the local real estate market before diving in.
What Type of Property Should an Investor Purchase?
As an investor, you have a menu of properties to choose from - single-family homes, multifamily buildings, commercial properties, and more. Each type of property has its own set of pros and cons, so it's important to choose the one that aligns with your investment goals.
Single-family homes can be a solid choice for beginner investors, as they tend to have lower upfront costs and are easier to finance. Plus, people will always need a place to live, so there's generally a good demand for rental properties. Just be prepared for the upkeep and management that comes with being a landlord.
Multifamily buildings can be a more lucrative investment, as you're able to bring in multiple streams of income, but they also come with more risk and a higher price tag.
Commercial properties can be even more expensive and complex, so they might not be the best option for those just starting out in real estate investing.
Financing, Budget, and Renovation
Next up: financing. There are several options for funding your real estate investment, including traditional mortgages, hard money loans, and private money loans. Each has its own set of requirements and terms, so it's important to do your due diligence and choose the one that's right for you.
And don't forget about the all-important budget. It's easy to get carried away when you're flipping houses or searching for the perfect rental property, but it's important to stick to your financial plan. Remember: it's not about the flashiest property, it's about the bottom line. A few years ago, I published an article about the Lessons I Have Learned While Working with Successful Real Estate Investors. I encourage you to read this and take those lessons into consideration.
Whether you're flipping a house or sprucing up a rental, renovations can be a major part of the real estate investing process. And while a fresh coat of paint and new appliances can go a long way, it's important to prioritize the projects that will give you the biggest return on investment.
That means focusing on things like updating the kitchen and bathrooms, fixing any structural issues, and adding energy-efficient features. And, as always, make sure to stay within budget and get multiple estimates from contractors before making any big decisions.
To Manage or Not to Manage? That is the Question.
Finally, let's talk about being a landlord. It can be a rewarding experience, but it's not for everyone. Being a landlord means being available to your tenants for repairs and maintenance as well as having a solid understanding of landlord-tenant laws. It also means being prepared for the unexpected – like that time my friend’s tenant's toilet exploded in the middle of the night (true story).
But don't let the occasional plumbing disaster scare you off. Being a landlord can be a lucrative and fulfilling pursuit, as long as you do your homework and set clear expectations with your tenants.
First and foremost, it's important to screen your potential tenants thoroughly. You want to make sure you're renting to responsible, reliable people who will take good care of your property. This means getting references, running credit checks, and even doing in-person interviews if necessary. Trust me, it's worth the extra effort to avoid nightmare tenants.
Once you've found the right people, it's important to set clear rules and expectations. This means having a written lease that outlines things like rent payments, guests, and property maintenance. It's also a good idea to conduct a move-in inspection, with both you and the tenant present, to document the condition of the property.
Speaking of rent payments, it's important to be consistent and timely with collecting them. This can be one of the most challenging aspects of being a landlord, but it's also one of the most crucial. One way to make the process easier is to set up automatic payments or offer online payment options.
When it comes to repairs and maintenance, it's important to have a list of reliable contractors or handymen on call, as well as a budget for unexpected repairs. Just be sure to prioritize safety and habitability issues and communicate with your tenants about any work that will be done.
Now, let's talk about the elephant in the room: evicting a tenant. It's a situation no landlord wants to find themselves in, but sometimes it's necessary. It's important to familiarize yourself with your state's eviction laws and procedures, and to follow them to the letter. You'll also want to document everything and have a solid case before moving forward with the eviction process.
Of course, the best way to avoid the headache of eviction is to prevent it from happening in the first place. This means setting clear expectations, being responsive to tenant concerns, and being proactive about addressing any issues that arise. If all this sounds overwhelming – perhaps the easier solution would be to hire a management company to take care of the overseeing of the property. You will sacrifice a percentage of the rent for this luxury, but a good management company can make you more profitable and keep you out of trouble in the long run. Make sure to ask for referrals for reputable companies and interview them all until you find the people who you understand your goals and can set expectations on how they handle the issues that can and will arise as a landlord.
So, are you ready to join the ranks of real estate investing pros like yours truly? It's not an easy road, but with a little grit and a lot of research, you too can become a successful landlord or property flipper. Just remember; location, property type, financing, renovations, and landlord responsibilities are key. And always keep a bottle of Diet Dr. Pepper on hand – you never know when you'll need to celebrate (or drown your sorrows).
I would love to hear your thoughts or have a discussion with you about flipping homes or investing in real estate in Utah County, Salt Lake County, Midway, or Heber City. Please reach out to me at (801) 885-2558 or by email at brandonrwood19@gmail.com.