By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems
Are you thinking about taking out a mortgage to purchase a rental condo in that hot new neighborhood across town? Has a co-worker you know funded their summer vacations with a dedicated AirBnB? Would you like to set up your own, and do you see yourself owning a commercial property? In other words, are you ready to become a landlord?
Before you become personally responsible for decisions that will impact the success of your investment, consider the following questions before you jump into that landlord suit.
1. How much money do you need to get started?
Buying a property directly — land, building and all — either for rental or resale can be an expensive prospect. Plus, many such projects involve some improvement work, renovations and repairs. And don't forget ongoing costs, including property taxes, insurance and mortgage insurance.
2. Should you take on a debt position in your purchase, or do you wish to buy with equity?
Deciding between debt and equity implies a considerably advanced level of investment that many people will never encounter directly. But on the other hand, if you consider the full gamut of real estate, there’s the chance you might face these distinctions, and understanding the pros and cons of each of these structures can be crucial for maximizing potential performance and minimizing risk.
3. What type of property and business plan are right for your market?
The most popular real estate assets for direct investment are residential — houses or condos. But have you considered retail or office space? Maybe there’s been a new influx of young professionals and office buildings are increasing in value in your area. Make sure your money is doing the most it can in any circumstances.
4. Understand your area's opportunities and risks.
A warehouse in Brooklyn might have an altogether different outlook from an identical structure in Poughkeepsie. Is the area likely to grow? What are the location-specific variables that may impact your project. These might include natural disaster risks, new use restrictions, zoning changes, and even noise pollution, all of which can make it difficult to secure tenants.
5. Do you have the time necessary to devote to your new real estate project?
If your investment requires a landlord, can you spare the hours? If not, can you afford to hire a property manager? Unlike other investments, which require attention only trading hours, an investment property requires constant administration as long as you own the investment.
If you are considering an investment in commercial real estate or residential properties, or have investment opportunities to offer, CLICK HERE
to contact a Global Property Systems Local Area Expert.