It’s no secret that investing in real estate is one of the highest yielding methods to diversify your portfolio.
This is because with risk comes reward. This article was written to make sure that when it’s your time to invest in property, you are careful not to fall for the avoidable pitfalls.
Being careful means finding an investment property that will generate optimal returns.
How do you ensure that you find a secure real estate investment with the potential for high returns in Boise, ID?
Continue reading to find out.
1. Don’t listen to your heart.
While this overplayed advice can work in some areas of your life, it doesn’t work when it comes to real estate (or any kind investment really).
In real estate, you have to look at your investment options objectively.
Buying a real estate investment is an important financial undertaking. When it comes to rental property, you must treat it as a business.
The worst thing you can do is acquire property just because you like the scenery. There is more to choosing an investment property than how it looks.
Buying the ugliest house on the most desirable street is often a smart choice because you can purchase it for less and resell it for more after a few renovations and some time for appreciation. Not to mention it is easier to rent out because of its convenient location.
2. You’ll need to do some research.
Knowledge is power when it comes to the real estate industry.
The options available to investors in the world of real estate is incredibly diverse. There are various types of investment opportunities and strategies you can choose from.
To make the best decision, research is essential. You cannot succeed if you don’t understand what you are dealing with.
Make it your mission to accumulate as much knowledge about real estate investing and the local real estate market as you can, as well as understand your own budget and available resources.
You can find valuable information from property owners, estate developers, estate agents, and good old trusty Google.
Armed with the right information, you increase your odds of landing a safe real estate investment that best suits your goals and investment needs.
3. Seek guidance from real estate experts.
A good real estate agent is well-versed in the ways that their local real estate market works and its unique trends. Hiring the right advisors can make the process of finding your ideal investment much easier.
Most real estate agents have the relevant experience and knowledge to help you succeed. Hiring the right one is, however, key.
A good real estate agent will help guide you through the whole buying process, including the negotiation. This way, you’ll be able to avoid making common mistakes that can turn out to be costly in the end.
4. Cast your net wide.
Don’t pick the first investment you come across. Take your time and look over as many as you possibly can.
The real estate market is one that is made up of all kinds of investment opportunities. Even if it seems like your first option is the best, look over as many available listings as possible.
And when you do find the “one”, make sure that you’ve asked every question you can think of to the prior owner and your real estate agent.
5. Have the property inspected.
The only way to make sure that you are buying a safe investment is by having it thoroughly inspected. The goal of the inspection should be to determine whether the property is in good condition or not.
The last thing you want is to invest in something that could significantly eat into your profits and cash flow.
That doesn’t mean that all properties requiring repairs and maintenance are deal breakers. There are some that could actually become good investments. Just make sure that you are fully aware of the costs involved that would give you bargaining leverage when it comes to the price of the property.
6. The 1% Rule.
In real estate investing, the 1% Rule helps investors determine whether a rental property will produce cash flow. This is a general rule you can follow when trying to figure out which property to do further research on.
If the income from rent exceeds the property’s monthly mortgage payment, it means that the investment is likely to be profitable.
Let’s look at some examples to better understand how this rule works.
Example 1: Suppose you find a property that has an asking price of $150,000 and rents for $1,500 per month. If we divide the rent by the asking price, we get 1%. In this case, it means that the property meets the 1% rule and would be worthwhile into further analyzing. ($1,500/$150,000).
Example 2: Suppose you find a property that is going for $130,000. In this case, however, the property requires repairs amounting to $20,000 to make it rent-ready. For this property to meet the 1% rule, it means that you would need to rent for not less than $1,500 per month. ($1,500/[$130,000+$20,000]).
Keep in mind that the 1% rule is just a rule of thumb. In some cases, it could be possible to earn a profit from properties that fall outside of this range.
7. Look at the vacancy rates.
Without a tenant, you’ll be in negative cash flow at the end of the month. This is the worst position you can be in as a landlord in Boise, Idaho.
Besides zero income, you’ll also have to look elsewhere to meet the property’s other expenses. Good examples of these expenses include insurance, utilities, and taxes.
That’s why, as the savvy investor that you are, you need to ensure that the neighborhood has a low vacancy rate before considering investing there.
Real estate investing in Boise can be risky if you don’t start your journey properly. Finding a property that has the potential for high returns isn’t an easy endeavor.
You need to have the right skills, some industry knowledge and do a lot of research to succeed in the business. Luckily, these 7 tips will get you started on the right foot.