Real Estate Matters
By Elisa Jo Eagan
Looking for ways to invest in real estate doesn’t have to be a scary experience. But it does take some careful planning.
You may think that real estate investing is a simple process of identifying a likely property and posting an ad for a renter, there is much more to the process. Here are nine questions you should ask yourself as you begin developing your real estate investment portfolio.
- What investment model will you choose?
There are a variety of ways to invest in real estate. You may choose to purchase a “handyman special,” or find an undervalued property, fix it up, then offer it for resale.
If you identify a property that you want to keep long-term, you may want to pursue a buy-and-hold strategy. Or you opt for long-term military housing, single-family home, yearly rental, island community summer vacation rental property, or a short-term Airbnb investment may be for you.
- What updates are needed for a flip?
Generally, you will want to add value to a flip while keeping a close eye on profitability. You will need to make repairs and updates quickly to minimize the carrying costs of the property, including mortgage payments, insurance and taxes.
Often, flippers will favor low-cost, high-impact cosmetic improvements such as kitchen, bath, flooring and other attractive updates to enhance the marketability of the property and increase its appeal to potential buyers. Remember to let cost, availability and market impact and ROI guide your choices, not your taste.
- What about buy-and-hold investment?
Often, buy-and-hold investors put less time and effort into cosmetic upgrades in favor of getting the property market-ready and occupied as quickly as possible. A buy-and-hold property may be ready to go on the rental market with only a deep cleaning and a lawn cleanup.
But if some of the home’s systems are significantly out-of-date, you may want to make needed repairs or updates before bringing in tenants to save time and money down the road.
- What about a short-term rental?
Short-term rental owners focus more on the location of the property, along with the number of beds it will hold and the number of value-added amenities they can include.
Part of the expense is furnishing it comfortably and adding necessities like dishes, kitchen utensils and other accessories. Upgraded fixtures and finishes are often included to make the property show better online.
- How will you manage and maintain the property?
For long-term and short-term rentals, you will need to consider whether you want to be a landlord, or turn the responsibility over to a property management company. If you are handy and looking for something to do with your time, you may feel comfortable coming out for late-night repairs or onboarding renters.
Many times, when purchasing in a condominium community, having an on-site rental manager or repairman to assist you will be most beneficial. Otherwise, a property manager can provide needed expertise and around-the-clock assistance.
You also need to decide if you want to be the one cleaning and prepping the property between guests or hire a cleaning service. For weekly summertime rentals, typically you have a “window-of-time” on Saturdays between 10 a.m. and 2 p.m., to get ready for the next tenant.
The peak summer rental time period is 13 consecutive rental weeks from Memorial Day week to Labor Day week. Ask around for a good cleaning service that specializes in working with this type of rental to assist.
- How will you find renters?
You may be considering placing your property on the internet or putting the word out to your Facebook friends. In most cases it’s a better idea to work with a professional Realtor, leasing agent or through a property management company to find well-qualified tenants who have been thoroughly vetted before moving into your property.
It is far cheaper to properly market a property and check out tenants ahead of time than to evict someone for non-payment or repair damage from a bad renter.
- What Requirements Will You Put on Your Renters?
Will you allow pets? Will you require the tenant to maintain the lawn? Will you charge a co-pay for repairs? There are many things to consider before you rent out your property. You will need to ensure that they are adequately spelled out both in your initial marketing materials, and in your rental lease agreement. Also, make sure you thoroughly read and understand the New Jersey Truth In Renting Act Booklet.
- What will you provide?
Will you pay some or all of the utilities? Will you pay the HOA or condo fee? Will you pay for pool maintenance, lawn care and pest control? Weigh the impact of paying some of the costs associated with property upkeep, against the liabilities that you will incur if the tenant does not properly maintain the home and grounds. You may find that it is more cost effective to charge a higher rent and do more of the dirty work yourself.
- What are your goals?
Do you want to add to your property portfolio or eventually consolidate your holdings? Are you interested in commercial property, or perhaps a multi-unit motel? Do you want to own exclusively in our local market, or branch out? Consult with a trusted real estate professional for the advice and expertise you will need to make better decisions both now and down the road to prevent having a frightening experience.
For More Real Estate Questions, Information and Advice Contact Elisa Jo Eagan “The Real Estate Godmother” (609)703-0432 and Remember…”There’s No Place Like Owning Your Own Home!”
