Getting Started with Investment Properties
With all of the recent construction in and around Prince George’s County, it may be a good time to invest in rental property! Investors looking to diversify their portfolios will find a great opportunity in purchasing local real estate and turning it into rental property.
Investing in rental properties can be a valuable and realistic plan for almost anyone with a basic understanding of real estate and the capital to make it happen. The best part is that rental properties provide consistent cash flow without a large time investment. Any individual – regardless of age – can benefit from investing in rental properties, and here are some tips to help you get started.
How Do Investment Properties Make Me Money?
Landlords who rent out their properties make money both when tenants pay rent and whenever the properties’ value appreciates. Additionally, property owners have the ability to utilize a number of tax deductions to maximize profitability.
Successful investment property owners in Prince George’s County rely on professional property management companies to handle the day-to-day dealings of owning a rental unit – saving you time and money. A good management company will find all the tax deductions available to you and will also suggest further opportunities to help you get the most return on your investment.
Start at the Bank, Not by Shopping for Properties
It’s fun to daydream about turning certain homes or buildings into an income property that you can enjoy for years to come. Maybe you want a vacation home to earn a profit in the off-season, or you want to develop a portfolio of investment properties to build a steady stream of passive income. A great way to start your venture is by talking to a local banker.
You must assess your financial situation very carefully. Renting out a property can be very lucrative, but those who invest also need to be able to cover losses in the event that your property is vacant between tenants, or it is in need of unexpected major repairs, etc.
Research the following keystones when looking to finance an investment property:
- Your personal finances – You need to have at least 6 months of income set aside to cover personal and investment property expenses in the event that something does not go according to plan. Having an emergency fund offers peace of mind, and alleviates future stress.
- The local market – Before you start looking at properties, you need to understand the local real estate market. What are average rental prices around Prince George’s County? Which neighborhoods are most lucrative and why? Those questions yield valuable information about how much you should consider paying for a home in certain areas. A local property management company would know the best areas in Maryland and should be able to give you current trends and statistics to help you make a well-informed decision.
- Demographics and projections – Look for opportunities where they are currently, not where you wish they might be. Consider the areas in the county that are poised to skyrocket over the next few years, and cater your decisions toward the type of tenants you can expect to see in those areas.
You’ll also need to budget for all of the possible expenses when you invest in a rental property. The expenses above and beyond the mortgage may include, but are not limited to, the following:
- Property taxes
- HOA fees
- Maintenance (appliance upgrades, flooring, painting, structural inspections, pest control, etc.)
- Property management fees
Finding an Income Property in Prince George’s County
After you understand the costs associated with investment properties, you can begin to look at prices and homes in target neighborhoods throughout the county. Look deeply into each prospective area to determine the best potential for tenant desirability. Consider the following factors:
- Neighborhoods – Spend time in each potential neighborhood. Consider proximity to common amenities and the type of individuals who live in the area. Some neighborhoods may be more family-friendly while others may cater to young professionals or college students.
- Schools – Look at school ratings in prospective areas. Proximity to schools can be a strong deciding factor for families. Areas that have access to both private and public schools are great locations for family-focused rental properties. If you prefer to rent to young adults, consider post-secondary establishments in the area. Rental properties near technical schools, colleges, and universities can be great locations to earn a consistent profit.
- Safety – Crime reports in a neighborhood are valuable to property owners for a couple of reasons. First, a safe neighborhood decreases the likelihood of your property being burglarized or vandalized. Second, it provides encouragement to prospective tenants who value safety when looking for a home to rent.
- Amenities – Even if a rental property does not have every bell and whistle, a property with access to valuable amenities increases the appeal of the home. Neighborhood pools, recreational facilities, and parks are all great assets to a rental property’s success and will attract prospective tenants.
- Protect your personal finances – One recommendation from a seasoned rental property owner is to never invest in rental properties under your personal name. Instead, talk with a lawyer and create a partnership or other form of company to secure your personal assets. A Limited Liability Company is the most common. In the event that something goes sour, this setup ensures that your personal finances are protected.
- Diversifying property types – In addition to residential properties, you could invest in commercial properties, multi-family properties, vacation rentals, or other ventures. The basic considerations for real estate investment remain the same across the board, but one opportunity may be more viable than others for some individuals.
- Invest now – Contrary to popular belief, a great time to invest in rental properties is when you’re young. Young professionals who have the right cash flow can utilize an FHA (Federal Housing Administration) loan. These loans provide insurance in the event that a borrower defaults. People in their 20s and 30s can put their first home to work for them as an investment in the future. The real estate market is on an upswing, so 2015 is a great time for new property owners to start investing.
Investing in Property Management
If you plan on investing in multiple properties or have another job that takes up a lot of your time, consider hiring a company that specializes in property management in Prince George’s County.
Bay Property Management Group offers comprehensive property management services for property owners. By using an external company, property owners save time that would otherwise be tied up in the operation of a rental property.
A property management group can help market and screen potential tenants, maintain the property, collect rent, and ensure that properties remain up to code.
For rental property owners, these professional services can be invaluable over time. Taking care of rental properties on your own can turn into a full-time job, and depending on the cash flow, a property management company in Washington, D.C., Northern Virginia, Baltimore, Philadelphia or surrounding counties may be well worth the investment.