America is going through a cultural shift. In the 1990s, the Clinton administration pushed to increase the number of homeowners across the country. Lending programs helped to lift the homeownership rate by 5% from 65% to 70% by taking cultural differences among minority groups into account. Down payment assistance grants and other programs helped with this. What followed was the rapid boom of the 2000s which had a hand in the Recession.
This has led to the cultural shift that is happening in the country. There are many people who are able to buy a house who are instead choosing to be long-term renters. This has started with millennials, but is it a trend that is becoming popular with boomers who are downsizing when they retire. For some people, homeownership is no longer a part of the American Dream.
There is some good news and that is the opportunity this creates for people who want to invest in residential property as a means for improving their financial portfolio. Nation-wide, 13% of the existing home sales from June were bought by individual investors. This statistic comes from the National Association of Realtors.
The problem is that home prices are rising and they increased by 5.2% in June 2018 when they were compared to June 2017. The median sales price in Washington DC rose to $455,000 in July 2018 which was an increase of 3.4% from the previous year. This increase in price means that you need to carefully weigh the costs and benefits of investing.
There are 5 areas that you should focus on when researching. This should be done if you are looking to buy your primary residence or if you want to invest in rental properties.
Identify Your Goal
Around 45% of investors are looking to buy Hollywood real estate for the rental income according to NAR’s 2018 Investment and Vacation Buyer Report. The rest of the properties are bought for either a long-term price appreciation or to flip. If you are planning to flip the property, you need to understand the full costs.
The costs you need to consider include the purchase price and the money you need to spend on it. The time you spend fixing the property also needs to be taken into account. To be successful with flipping, you need to know good contactors, have good skills and know the market.
If you want to hold onto the property for longer, you need to choose a property that will attract long-term renters. Properties in a good school district or within a desirable area will easily attract renters. You should not buy any property which is functionally obsolete because it is cheap. If the property has more than one bedroom, renters are going to want more than one bathroom.
Evaluate Your Financing Options
In 2017, 42% of investors paid cash according to NAR. If you do not have the cash to cover the full price of the property, you need to have a down payment ready. Lenders will generally want investors to have a larger down payment usually at least 20%. They also need to show good income and credit.
Before you start looking for a property, you need to meet with a lender as this gives you an idea of your potential budget. When it comes to qualifying for a loan, you could be able to use anticipated rental income. This is only possible if you look for homes that have a history of renters or you have a track record of renting properties out.
You should not forget about the tax implications of investing in real estate. You also need to include the cost of repairs, maintenance, insurance and vacancies into your financial calculations.
Local Or Long-Distance Ownership
A lot of investors who live in areas with high property prices will look at other markets to invest in because they are more affordable. While local ownership has its benefits, there are some benefits for long-distance ownership. When you buy local, you will better understand the neighborhoods and the dynamics of the market. Long-distance ownership has become easier with websites offering market analysis and you may have the chance of purchasing a property that someone is already renting.
Research Home Prices And Rent
A comparative market analysis can be done by a Hollywood real estate agent or a Realtor and you should work with someone who has experience with rental properties and investors. This analysis will help you determine home prices and the rent you can get now and in the future. Of course, there are no guarantees in the housing market, but a good agent can help you choose the right investment property for your goals.
Being A DIY Landlord Or Using A Property Management Company
If you are going to be a long-distance landlord, this decision is made for you. A property management company will support your investment and take care of everything related to the property because you are unable to. However, if you are buying a local property, you need to consider your options.
In these situations, a property management company might still be a good idea even with the costs. The company helps you screen potential tenants and will handle all other tenant-related issues such as late rent. You can also have them take care of the maintenance and repairs as they are likely to have contractors on call. If you do not want to spend any money on a property management company, you can do this all yourself, visit https://nestfindrrealestateagents.com/hollywood/ for your Hollywood real estate agent needs.
As you work through all of this research, it is recommended that you talk to your potential lender. You should also talk to an estate agent with investment experience as they can help you make the right choices for your circumstances.