Is This Your Situation: What Are the Risks Tied to Investment Properties?
An investment property can be an excellent way to secure your financial future. Rental real estate is a positive way to invest your money with the potential of a high rate of return as well as a steady income stream throughout the life of your investment.
However, investment properties don’t come without their share of risks (because without risk there is no return, right?) even if it is far less volatile than other investments such as purchasing shares. It is extremely important to seek out professional, financial advice and develop an investment strategy before you even start looking at properties.
Here is a short list of the best ways to reduce your financial risk.
1. Know the real estate market – and the area. The key to success with an investment property is to purchase in an area that has strong demand from buyers, so that when you are ready to sell sometime down the line you will maximize your rate of return. Another component of a successful investment is buying in an area that has strong demand for renters. The location should have good amenities that can attract better tenants.
You will want to work with a Realtor who can provide quality information on neighborhoods and the most up-to-date comps on properties.
2. Purchase adequate insurance. Insurance is a cost of doing business. Make sure that you have insurance in place that covers your property and you personally. Beyond policies that physically protect the rental property, you can protect the rental income stream with insurance that is designed to avoid any revenue interruption or the legal costs required if you must evict a tenant.
Also, by purchasing equity insurance you can also make sure that the equity you invested in the property will not be reduced.
3. Keep a financial buffer in place. Discuss with your financial advisor your options regarding a line of credit or an offset account attached to your loan as well as investigating all of your mortgage and interest possibilities. You will want to use good financial accounting practices to manage your cash flow, capital expenditures and operating costs for the property.
While interest rates have been historically low, do not fall into the trap of believing that this is the status quo; interest rates are sure to rise at some point. Consider a fixed rate loan for at least part of your financing.
4. Consider using a property manager. Again, think of a property manager as a cost of doing business when managing an investment. A property manager will be able to help you meet fair housing regulations and maintenance standards. Also look into a home maintenance warranty to reduce maintenance costs on the property.
While you can never predict every scenario that can occur as a property investor, you can be prepared. Reach out to me today to learn how you can maximize your revenue stream over the long term.
Unleash the Power of Real Estate Investing!
Are you ready to take advantage of the growing demand for new construction homes and rental properties? Investing in apartments offers long-term financial security and significant cash flow potential, while new construction home projects offer the potential for faster profits. Don’t miss out on the opportunity to diversify your portfolio and build wealth through real estate.
Get in touch with us today to learn more about high-potential new construction homes and apartment investment opportunities, access expert market insights, and start your investment journey. Schedule your free consultation!
