We hope you are having an amazing year and that your cash is flowing like Niagra Falls! Earlier this month we talked about 5 tips for buying a condo investment property so now we would like to go over singe-family homes. Most investors start their portfolio’s with condos because the acquisition costs and upkeep are much easier, but if you are looking to capitalize on the benefits of appreciation then there is no better investment vehicle than a single-family home.
Of course if there is the potential for greater reward there is also bound to be more risk and that is no exception here. Because of the fact that you are responsible for everything to do with the structure things are much more complicated with single-family homes. But that’s why you have come here, because we can help you prepare for the worst and achieve the highest returns.
Tip #1: Buy in an Area You Know
Unless you have been in an a neighborhood at varying times of the day you can never really get the feel for whether it is a good area or a bad area. And bad areas will hurt you bottom line. Of course you can check crime reports but those don’t account for late partying neighbors, loose dogs in the streets or even flooding. Of course you may never be able to completely avoid partying neighbors but as far as the dogs and flooding that’s something you may be able to know if you are very familiar with the area. Since many single-family home renters will have children the dogs are a big problem and nobody likes driving through a lake to get home after a Miami downpour.
Tip #2: Close but NOT Too Close to Home
Many first-time investors want to buy either in their own neighborhood or even across the street from where they live! The reasoning here is that they will be better able to keep an eye on the property. While that may be true buying too close to home has some major disadvantages. First, you may scare of good tenants who want their privacy from a nosy landlord once they find out you live down the block. Second, there are often small problems in homes that are not emergencies but which may feel like emergencies to tenants who are paying a large portion of their income towards their rent. If you leave around the corner they may be tempted to stop by your home if they are unable to reach you and then your privacy is being invaded. Of course the best way to handle small tenant problems is to hire a professional property management company to take care of them for you such as…Real Property Management Miami. So our best advice is to follow tip #1 and buy in an area that you know but that is at least 10-15 minutes away from you home, so you can check on it every now and them if you want but you will avoid unwanted visitors.
Tip #3: Get a Decent Inspection Period and Hire an Excellent Inspector
The inspection period on your purchase should be at least 20-30 days. Many properties such as foreclosures will want you to put a 15 day inspection period but unless you have done this before you should give yourself more time, mostly because crap can and will happen.
The point of an inspection is to avoid as many surprises after closing as possible. The guts of the property are essential here, specifically the electric, plumbing and roof. If any of those three are bad you could be looking at a hefty repair bill post closing that will ruin your bottom line. And beware of crappy inspectors or guy who will do an inspection for less than $100. A good inspection should cost somewhere around $300 and it will be well worth it because you will know exactly what is wrong with the property so you can decided whether or not to proceed with the transaction.
Tip #4: Buy at least a 3 Bedroom 2 Bath (With indoor Washer/Dryer)
As we mentioned earlier, most prospective tenants of single-family homes are going to be parents with children. Most single people would much rather not deal with the extra maintenance that a large house requires, but a family is just the opposite they are in desperate need of that extra space…or else they may lost their mind! There is not a major list of deal breakers but having only one bathroom is probably enough to keep the good ones away. And you can get away with a 2 bedroom but definitely don’t go for the one bathroom. And if you have lived in South Florida for a while you know that for some reason (year round warm weather?) many homes have their washer in dryer in a separate room outside of the main house. But what those savers of space fail to realize is that extreme humidity and heavy rain can be just as bad as snow so most good tenants will want to make sure there is a washer and dryer in the house.
Tip #5: Limit Your Liability…Avoid Pools and Raised Homes
Homes are dangerous places that can result in major injuries if you have some complicated obstacles such as stairs or pools that the uncoordinated can easily hurt themselves on. In South Florida many homes are actually raised about 5 feet of the ground which creates a nice crawl space where critters can enter if not properly sealed and which also creates the need for stairs. Stairs are a liability because people really are not that coordinated and may fall down them. And then there is the pool. Of course you may be buying in a neighborhood where pools are standard and if you are are then you need a pool but if not avoid it at all costs. First you will avoid the extra maintenance problems that pools bring and second you will avoid horrible accidents such as accidental drownings.
We hope we gave you some great ideas for buying an investment home, if you have additional questions or just want to chat about residential investment strategies give us a call at 305-517-3900!
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