Investing in real estate is often a winning proposition that can bring in extra income and help you build wealth. However, before you start buying property, it is important to make sure that you are financially ready and willing to put in the work that is often involved in being a landlord. If you are considering purchasing an investment property, it is a good idea to seek the counsel of a real estate transaction lawyer who can help you vet the property and assess whether it is a viable option for supplemental income.
How to Make Investing in Real Estate Worth Your While
Purchase with Cash if You Can
Ideally, if you have cash on hand, using it to buy an investment property makes more sense than financing it. If you decide to take out a commercial loan or mortgage, you must make sure you will be able to afford the payments, even with no rental income. Although rent is a great source of income, it is not always steady. There can be high turnover with renters and unexpected events can lead to having no renters at all.
Take All Expenses Into Account
The cost of owning a home or investment property involves a lot more than a mortgage payment. When looking at a rental property, it is critical to consider the cost of repairs, maintenance, taxes, liability insurance, and utilities. If you are buying a property out of state or are considering using a property management company, add the cost of that in, too. Remember that unexpected expenses can arise at any time, so it is important to sock some money away for emergencies. After you look at the total cost of your expenses, it will be easier to determine how much rent you will need to charge to ensure that you are fully covered each month.
Do Your Research
Whether you are purchasing residential property, a commercial space, or land, it is essential to research the deed and title thoroughly.
A West Chester real estate attorney can do a title search and find out if there are any existing liens or other problems with the property. Another thing you will want to review are comparables in the neighborhood and how much the average cost of rent is in the area. It is also a good idea to look at crime statistics and find out if it may be an up-and-coming community, which can help to maximize your investment if you find a property at a low price. There are other external factors that can affect property values, but it is important to keep in mind that most investments involve a degree of risk.
If you want to invest in property but do not have a lot of cash, a good way to start is to purchase a duplex or mixed-use building with a unit you can live in while you rent out the other spaces. That way you are only paying one mortgage, which can allow you to live comfortably and avoid spreading yourself too thin financially. If you decide to purchase a property with renters, a contract lawyer can help you draft leases that ensure your interests are protected and that the rules you put in place are compliant with local and state law.
Are you ready to get started with investing in real estate? Our Pennsylvania real estate lawyers can help.