Folsom is a great place to live and an even better place to own an investment property evidenced by the numbers of first time investors who came through my open house this past Sunday. Many are just starting their investigation and some don't really know what to expect so I've complied the answers to the seven most common questions about real estate investing.
1. How important is location? Investing in the best location you can afford will dictate the kind of tenants you will attract, and in turn, how much rent you can charge. More desirable neighborhoods appreciate more over time and are less susceptible to the ups and downs of the real estate market.
2. What about repairs? Expect to spend some money on repairs and resist the urge to upgrade. Your thinking should be based on an investment NOT what you would want if you were living there. The rule of thumb is light, bright and clean and remember you will need to factor in new paint and carpet every few years.
3. How do I avoid capital gains? There is a tax rule (1031) that allows for investors to exchange like properties and avoid capital gains so long as you don't take any profit from the sale. This will allow you to build a nice real estate portfolio if that is your retirement strategy. For most small investors real estate is a buy-and-hold investment and a time frame of at least seven to ten years will allow you to ride out any swings in the market and provide a nice cushion for your retirement. Leave the flipping to the seasoned vets and think long term.
4. What are the costs involved? Calculating the property taxes, insurance, utilities, maintenance, and repairs are considered the cost of doing business...more than just the mortgage payment. Vacancy rates vary but if you buy smart you should be able to figure in a conservative 5% which is standard in the industry.
5. Are fixers a good deal? Buying the worst house in the best neighborhood can work to your advantage. Renters look for better schools and neighborhoods and are less picky about floor plans. Deferred maintenance is the usual cause of property repair so if you have the cash on hand and are not afraid of a little work, you can increase your value by some sweat equity. Don't skimp on the major repairs though, always hire a licensed contractor.
6. Can I do the credit checks myself? Pay the extra money to run a full background check when screening future tenants. I can't stress this enough! Running a credit check will give you the basic information that is available electronically but doesn't address issues that can only be found by a phone call or letter. Some states don't make information available electronically so you won't know if they've got child support or other obligations that could impact their ability to pay rent.
7.Where do I learn about landlord rights? The Dept. of Consumer Affairs and HUD websites have everything spelled out. Learn about the eviction process and other potential issues so you can do things right, saving time and money. Remember the goal is to find tenants that pay the rent on time, leave the property in good condition, and don't cause problems with the neighbors. If you would like help finding investment property in Folsom please email me for more information.
For more local information about Folsom, CA to to http://www.FolsomLakeHomes.com
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