There’s a belief in investment circles—almost taken as gospel truth—which says that you can never go wrong with investing in real estate because the land will always be there, and land prices are almost always going up. But this is not entirely true because a lot of investors have lost their shirts after making bad investment decisions involving real estate properties.
Some of the hottest real estate deals can be found in the cities and suburbs of Florida, which are considered among the best places in the U.S. markets to get rich from. Among those cities and suburbs is Orlando, Florida, which is world famous for its theme parks, attractions and beautiful weather. There are lots of Orlando homes for sale which have traditionally yielded strong returns for residential real estate investors.
How To Find A Real Deal
Investing in real estate can be really exciting, especially for people raring to find good deals where they can place their hard-earned savings. But before you write that check for what seems to be a tempting real estate deal, you might want to go over these tips first.
1. Inspect The Home
The first thing you have to know about investing in residential real estate is that you should never skip the home inspection. Before you make an offer on a home which looks like a steal to you, think about hiring an independent consulting engineer to assess the condition of the home.
There are many things about a home that can’t be seen by the naked eye of even the most experienced real estate investor. For instance, you’d need to inspect the home’s foundation to make sure there are no issues with the structural integrity of the house. It may seem an added cost for now, but it could save you a lot of time, money, and stress if the house turns out to have foundational or structural problems later on.
2. Research The Location
Next thing you have to do is you need to research the location. In Florida, for instance, even though the Orlando housing market has proven to be one of the most profitable in recent years, you still need to make a thorough research about the neighborhood. It doesn’t matter what you’re planning to do with the property. Whether you plan to flip the property or rent it out, doing research is still crucial.
One of the most important things you’ll have to look into is the selling price of the homes which were recently sold in the same neighborhood. This is what’s used by appraisers and banks to determine the fair market value of the property. You’ll get a better picture of how much the property is really worth if you find out how much the neighbor’s house was recently sold, or at least the final selling price of the houses in the same street or village.
You can also ask around how much rent is paid for the houses in the same neighborhood or those within the same general vicinity. This would give you a better idea of the pricing of rental properties in the location of the property you’re planning to buy.
3. Look Into the Cash Flow
The prospect of renting out a property is one of the come-on spiels typically given by real estate brokers to prospective investors. First-time investors are usually encouraged to buy a property when they’re told that many other similar investors in the same area have successfully rented out their properties. They’re told that these investors are now enjoying the endless stream of rent income from the home they bought.
Before you finally decide on buying that property you’ve been eyeing, do the math and see if the expected cash flow can cover the investment financing and the costs. You have to estimate the cash flow. This means you’ll have to compute the total cost of the mortgage, the insurance premiums, and taxes which would have to be paid monthly.
You’ll also have to add a buffer for the other costs which come with buying a home such as expenses for any repairs you may have to make from time to time, expense for credit and background checks of prospective renters, and other miscellaneous expenses such as lawyer’s fees, eviction costs, and property clean-up and repainting after the tenants move out. Once you have that total sum, subtract that from the rent you plan to collect and there’s your cash flow.
Studying And Choosing Your Investment
Even though investing in real estate is one of the best ways build wealth, you still have to be careful in selecting the specific properties you’re going to buy. A lot of people have lost money in housing market crashes in recent years and ended up with piles of unpaid mortgage loans. It’ll help if you keep in mind the tips discussed here: Inspect the home. Research the location. And, finally, don’t skip the math and look into the cash flow.