Blog Posts All February 24, 2019

6 Things to Consider When Buying an Investment Property

It is no secret that Marin is one of the most desirable places in the world to live. If you are considering investment opportunities, Marin real estate is a solid choice to build wealth and can create an additional stream of income.

Things to consider when buying an investment property:

1. What is your plan?
Will it be a short or a long term rental? Have you checked with the city or county on their short term rental rules? A rental within 1-hour driving distance (if not closer!) can help when there is a maintenance issue. Do you prefer a Single-Family Home or a Townhome with HOA’s that will offer more maintenance help? Or maybe a 2 – 4 unit building which can help cover your costs when 3 are occupied and 1 is turning over. Do you have time to self-manage the property or do you prefer a reputable property management company that can offer turnkey solutions so you can be hands-free?

2. How will you pay?
Cash or take out a loan? There are other options too; HELOC, hard money, crowdfunding, etc…If you plan on a loan, you will likely have to put more than 20% down. For investment properties, rates are generally slightly higher so be sure to discuss a realistic budget with your lender. I have referrals for lenders that work with investment owners.

3. What is your P.I.T.I.?
P.I.T.I. is an easy way to calculate your cost to own property. It includes Principal, Interest, Taxes, and Insurance. You will also want to consider if you will be paying a portion of the utilities/landscape maintenance, if there are HOA fees, or if you plan to make any improvements. It is a good idea to have your investment property be in good condition before you rent it out because this will likely lead to fewer maintenance calls, happier occupants and higher rents.

4. Create your team
Your team should include a real estate agent, an accountant, an estate attorney (to help you learn the benefits of your investment), a real estate attorney (just in case), insurance broker, landscaper, handyman, painter, etc. Additionally, a home warranty can save you money on future repairs. If needed, I have reliable referrals for these professionals.

5. What is your exit strategy?
Is it a 5-year, 10-year or longer exit strategy? Do you plan to do a 1031 exchange to increase your investment and defer your taxes? Your exit strategy will play a role in deciding on a good investment approach.

6. Who is your Realtor?
There are many things to consider when buying an investment property so hire a professional Realtor that can advise you on the best investment opportunities for your plan, research the current market rents, and provide access to off-market opportunities. Investment properties can be very rewarding. Marin Single Family homes have appreciated an average of 14.32% per year since 1990 and Condos had a 49.77% total appreciation since 2003. (See the graphs below).

The best time to invest in real estate was yesterday, the second best time is today!

If you have questions please give me a call, I would be happy to help you build the bridge to owning an investment property.