As an investor in real estate for over 25 years, I’m interested in keeping up with housing trends, especially during the summer months, the critical buying season that determines how the economy will fare through the rest of the year.
There’s good news from the S&P and the National Association of Realtors: although sales and housing prices decreased in June and July, they are still higher than they were a year ago, insuring a stable pattern that should last until the end of the year. This is good news for potential home owners and real estate investors.
As an accountant, people often ask me how they should invest their money I always maintain that rental property is the way to go — not the only way to go, of course; a good portfolio should reflect various investment venues. But overall, I tell them real estate is an excellent place to start.
When I recommend investing in single family homes, the usual response I get is negative because people tend to view real estate investing as risky business. They perk up when I tell them emphatically that I’m fairly risk averse, yet I continually look for property to invest in. There are some tried and true guidelines for purchasing and maintaining rentals that minimize both risk and hassle:*
- Look for properties that are in fairly good condition and are ten-fifteen years old. Although your down payment will be higher than it would be for an older home, getting the property ready to rent will be less of an ordeal. Try to find a home that only needs cosmetic updating rather than extensive repair.
- Remember this: the less siding, the less headache. I make sure the house is at least 3/4 brick or stone because the cost of painting and/or replacing siding is tremendous and adds up over time
- Include a clause in your rental agreement that requires the tenant to pay for repairs up to $100.00. Believe me, this is important because you won’t be called unless a substantial repair is necessary
- Create a group of go-to people: a good plumber, electrician, painter and all-around handy-man are essential. If you call on the same group of people to take care of problems as they arise, you’ll build up a rapport. These contractors enjoy working with rental property owners because they know they will be called on a fairly regular basis, especially if you own more than one property.
*Note: These guidelines are for those who want to purchase and lease rental property as a long-term investment strategy