In the current booming landscape of the real estate market, buying the residential investment properties can appear to be relatively low risk. Yet, learning from the history, where the reckless real estate boom era collapsed with the recession of 2008, caution is mandatory.
However, the Co-founder of the DoubleLine Capital LP, a fixed income investment management firm, Philip Barach, clarifies that if you choose and buy wisely, investing long-term, then residential investment properties can pay off. Yet, the dilemma remains to be how to select and buy wisely? Barach reveals below.
Location, Location, and LOCATION
Philip Barach shares that the key to choosing the right residential investment is similar to buying a home, yet more comprehensive. “Check and do proper research before buying about the location of the house, the locality must have good schools, nearby shopping spaces, and on-point neighborhood security giving low crime rates, and yes, some pretty parks too to go for a serene walk with your dog. However, this is all that we check for when buying a home, and so there is a lot more to consider while buying the investment property.
Philip Barach suggests picking a location that is near to your primary residence. “You will be running errands to the residential property more often. Tenants come and go; you will have to give prospects tenants a tour, things break that you must repair, and so buying it near to your residence will save you the hassle of commute,” he says.
Additionally, figure out your investment goals in a clear cut manner. Evaluate whether you need yield or growth, even though when the odds get in your favor, you will get both. Still, mostly you have to choose one of both investment goals.
“If you desire for yield, that is annual income divided by cost, then pick the biggest investment property in the best location you can afford. The thing is, exceptional neighborhoods are always in demand and attract high rents. However, if your growth is your ultimate aim, that is, value rising over time, then consider properties in ‘up and coming’ areas that you anticipate to appreciate as the block becomes more fashionable. Even though this can be a kind of get hard for you to evaluate, a real estate professional can help you pinpoint the next big neighborhood,” says Philip Barach.
Philip Barach also recommends reviewing the Zoning laws before buying the property. The zoning laws which regulate how a property may be used can vary from location to location and even neighborhood to neighborhood. “Specifically, if you plan to rent out a residential investment property, carry out thorough research about zoning regulations to make sure tenants are permitted. Also, it is essential to keep abreast of modifications in laws because zoning rules change to reflect current community priorities and are subjected to alteration,” he says.
Don’t Let the Emotions Take Charge
Philip Barach further elucidates that in most cases, when buying a home, buyers listen to their hearts more than actually thinking about it logically, which is perfectly justified as it is the place where you will be living for many years of your life. “Yet, do not let your emotions influence your decision when buying your first investment property. Consider it as a virtuously, business investment and logically negotiate to get the best possible price, without getting played by your emotions,” he says.
For those investors who are investing in real estate for the very first time, Philip Barach shares that it is better to opt for a low-cost home as your first investment property.
Remember, the lower the price you get for a property, the better the odds that you will earn a higher profit from it. Regardless of whether you have saved up a huge amount of money to buy a multi-million-dollar mansion as your investment property, it is recommended to go slow, learn gradually, and opt for a property that exists in the lower-to-mid-range price bracket.
The Bottom Line
Investing in real estate is equally risky as any other business and can give you either a good chunk of return or make you end up in hot waters. Yet, by playing it safe right from the start and making wise decisions, you can always remain on the winning side.
Jennifer Betts is a content specialist with a knack for conjuring up unique, creative posts that are insightful for the readers as well as entertaining. She has written on topics in diverse genres including, tech, business, fashion, health, and more.