Now is an ideal time to consider purchasing real estate as an investment vehicle for your long-term financial portfolio. It is a buyer's market, prices are at an all-time low, inventory is high, sellers are motivated, and you can find great values in Mercer County NJ homes. Ask yourself a few questions before you approach real estate as an investor, though, to be sure you have the right mental picture of the purchase.
1. Think long-term. Real estate is definitely a good method to accummulate wealth over time, and there have been years when short term "flipping" worked. This is not one of them.
2. Assess the benefits for your financial situation. You will get a return on your real estate investment in 3 ways: cash flow, savings on taxes, and appreciation. If you purchase a rental property wisely, you should acquire a steady source of income after reserves for maintenance and repairs, vacancy considerations, and mortgage payments. The tax benefits are very good, but you can't rely on those to meet your monthly obligations.
3. Do you want to be a landlord? If you don't want the hassle yourself, and decide to hire a Property Manager, build that cost into your cash flow projections. There are many legal considerations with property management, such as fair housing laws and collection/eviction procedures. Do you want to be conversant with these or can you afford to hire a professional?
4. Do you want to make repairs? If you aren't handy or are too busy, you will have to hire professionals to maintain your investment. You also may purchase a property that "needs TLC" and you'll have to fix up, paint, replace carpet, buy appliances, etc. prior to finding a tenant. Again, build in these costs up front. Think long-term - you want to take care of your investment, attract top renters who will treat it like their own home, and have valuable real estate to sell some day. Plan for regular maintenance.
5. How much down payment do you have? Buying non-owner occupied real estate requires a larger down payment. You might look at multi-family, like a duplex or 4-plex, and live in one of the units. But if you want to buy just a rental, be ready with more than 20% cash to put down.
6. Location is very important. A professional is invaluable in helping you learn the neighborhoods, their sales and rental histories, and appreciation potentials. Once more, think long-term. You don't want to buy near where a new freeway extension or airport runway is planned.
There are many houses on the market now being sold well below tax value. They just need a little TLC to make them ready for tenants.
Call or email me to talk about the best locations for purchasing rental property in Mercer County and surrounding areas. If you want to add real estate to your portfolio, now is the time.
Comments(1)