When buying property you also should take into account your skill level as a manager, renovating talents (do you enjoy fixing and remodeling property), abilities to fix problems in the home or finding someone who can (plumbers, electricians…), and this gets back to your overall plan. Are you the type of person who wants to take this on or needs to hire a property manager? Maybe a smaller building is better for you, one that you can handle and not hire a manager and save money.
Do you want to buy a property and pay someone to manage it, pay them to take care of any issues? Or, do you want to buy a new home or apartment, where you most likely will have little problems related to replacing or fixing items in the property?
There are also companies that will locate, build, and manage an investment property for you. A company we recommend is Trada.com, see their comparison of multi-family investments versus single-family homes.
Along with this, are you going to be living near the property or in another state or city? Essentially, how much time do you want to spend maintaining and managing the property? Is it a home that you may eventually live in or have a friend or family member relocate to? Say it’s a vacation type of home that you may move into when you retire or a place you would like to have access to in your later years. These are some of the types of issues to think about when you’re developing your real estate investing plan.
Don’t get into a situation where you discover a myriad of problems with the home only after you've agreed to buy the place and signed a letter of intent. When you purchase the property write into the agreement a clause for 'price contingent upon inspection and appraisal'. A number of problems could arise in those invisible areas of the house: electricity, plumbing, pests, mold, foundation, roof, and so on. And, include a contingence relating to the property maintaining its state in the time between when the deal actually closes.
Again, deciding what type of property you want is the key. Do you want to fix these problems yourself and thus get a cheaper property? Either way, with an inspection of the property you will learn a great deal and will determine the price you should pay.
Make a note of the condition of the appliances, how old are they. Forecast your expenses. Will I need to replace the carpets in these units? Are the refrigerators and ovens old or new—when buying the property these factors all will contribute to the total price you’re offering.
Insider Tips: Specific Types of Properties
Condos - Real estate experts say condos are more susceptible to booms and busts than single-family homes because they attract more investors who do not intend to live in them and are easier to build than a new subdivision let's say in most cities. NY Times
- Buy a condo with a lot of owner occupants rather than renters, owners have a vested interest in the common areas.
- Review home owner association dues, make sure there are no outstanding repairs needed that will increase your dues.
- For dues, find out exactly what you’re responsible for and overall rules, can you have pets, can you make modifications to your condo.
- But from a experienced developer.
Single Family home – Sole owner of land and air above it, no association fees, usually appreciate faster than say a condo, and have more privacy. Relo Home Search
Apartment complex – multi-unit building of generally four or more—requires a property manager.
Multi-unit home – a home where you rent out the lower half of the house, such as an in-law or split up a home into apartments—common in big cities such as New York and San Francisco.
Fourplex – four-unit dwelling; could act as landlord and rent out other units
Duplex – two-unit dwelling
Mixed Use Building – often cost less per square foot, it’s converting a building into a home and a store, split levels, common in bigger cities. NY Times
TIP: You want to own property that have unique qualities. Could be a property near the beach or in the mountains, offering skiing or the beach and sun? Try to buy property that holds some sellable charm or distinguishing characteristics. So when people hear of the area where you own property it’s immediately known to them. Stirs up images and ideas--wheter it's sun and the beach or skiing in the mountains or the beauty of trees and lakes. Places like Sun Valley, Idaho or La Jolla in San Diego. These are places that are desirable and have a center charm or even fame.
Learn more about Fixer Uppers at This Old House
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