Investing in rental property isn’t for the timid, but with proper research and due diligence, it is an investment worth considering.
Property Types for Investment
The first step is to determine what type of property you would like to invest in. The Orlando area has single and multi-family homes, townhomes, condo’s, condo-hotels, and more! The type of property depends on the level of risk and profit you are looking to achieve. For most investors, the answer to this will be a single-family home. Some, however, may be attracted by the possibilities of a duplex property that can command multiple rental incomes at any one time. These properties also have the advantage of bringing in at least some income even if one tenant moves out. Others find that condos can be good investments due to their purchase prices which tend to be lower than Single Family Homes. While Condos provide lower maintenance costs they have higher HOA costs which will need to be factored into the rent. Condos also will typically have owner occupant/renter occupancy ratios that need to be considered. The HOA can determine if those ratios allow for rentals. Typically condo purchases will be cash purchases as securing financing can be difficult. Townhomes can also be a good option as the purchase price is often similar to a condo but the HOA fees are reduced.
Pick a great location
Pick a great location. For long-term equity growth, a residential property in a good location is critical. Typically neighborhoods near colleges or close to business centers will offer decently high rental incomes.
Study the Metrics
When getting into any property investment, you should determine its ability to generate wealth. Many variables play a role in wealth generation such as historical growth trends, demographic information, population growth, vacancy rates, etc. Also by knowing where residency work you will gain a better idea of the kind of renters that will be likely to look for property in that area.
Analyze the Rent
The objective of purchasing an investment property is to earn rental income. To do so one must always be diligent in these types of decisions. Rent assessments on the property help to determine realistic profit potentials. To do this calculate how much money you need to earn from the investment. Review rent rolls for the area. Once this is known research the taxes, HOA, and general insurance costs for the area. Calculate management fees (typically 10%) and maintenance costs. With these numbers, you will have a better idea of the property that will generate the income you are looking to achieve.
Inspect the Property
First-time investors generally do not take the time to examine the actual status of the property they are considering purchasing. Consequently, they end up with a home that demands costly repairs. To save time and frustration, hire high-level home inspectors who can inspect and evaluate the property’s true condition. We work with inspectors who are thorough, dedicated, and honest who get the job done correctly. We would be happy to recommend one to you.
Know Your Exit Strategy
Rental properties can generate positive cash flow, but there may come a time where you would like to sell the asset. You need to make sure that you have the ideal exit strategy that will help you to sell or flip the property in a time frame and price that reflects your goals. If the time comes to sell your property we can help determine the repairs needed and pricing and get you on market fast and professionally.
Armed with the information above you can thrive in the Rental Market here in Central Florida.