Investing In Single-Family Rental Real Estate
Investing in real estate, and most specifically single family real estate, is certainly not the same as investing in the stock exchange or other kinds of investments. With real estate, as the investor, you’re directly involved in decision-making and shaping the direction of your business, which will have a direct impact on your returns.
Real estate, as a leveraged venture, carries the potential for significant profits. But when you look at other investment models like stocks, their market value is relative to the conditions of the market. This means that the only way you are able to impact your returns is when you decide to buy or sell.
Real estate is still generally regarded as a passive venture. But in reality, it’s a business undertaking that is very capable of short and long-term returns openly tied to expertise and choices of the investor.
Essentially, if you are looking to invest in single-family real estate, then you need to be well informed on tips and how-to’s that will improve your chances of success. You must come up with a certain strategy for the success that you want and be practical in your decision making.
If you do not feel you have enough financing, you can opt for a bridge loan. A bridge loan is money lent to you by private a financial institution rather than a traditional bank, who generally won’t lend money for real estate investment. As you start on the journey to single-family investment, here are a few things to consider:
Always be practical
Understanding the purpose and criteria behind your single family property purchase is very important, and you should do it with a level head without involving emotions. It’s one thing to buy a home for your family and getting excited with the things you see, but it’s another to only look at the figures and estimate whether or not they are in your favor.
Avoid depending on future expectations
If a property cannot guarantee income from the onset but relies on the promise of future demand, then it’s probably not worth the risk. Being optimistic about an increase in value sometime down the road is not a good idea when it comes to real estate investment, especially since the chances of disappointment are very real.
Prepare for income interruptions
Income interruption is one of the things many people overlook, but as someone owning a residential property and paying the mortgage from its returns, it’s important that you plan for all kinds of expenses you may incur along the way. The reality is that your property may not have tenants all the time. A unit may stay vacant longer than you expected, meaning you will be covering all the expenses yourself.
Understanding your location
Having information on paper about a location is not the same as visiting the area and assessing the location from the ground. The last thing you want is to utilize a bridge loan for a single family investment only to realize that you made a mistake in assessing the neighborhood. With single-family real estate, or any real estate for that matter, concrete on-the-ground-data is crucial for success.
Laws of the land
Different areas have different regulations and what worked for you in New York might not be work for you in Maryland. State and local laws vary, and unlike the stock market where the broker handles these kinds of responsibilities, in real estate, it’s up to you to acquaint yourself with expected obligations before you even purchase a property.
It’s clear that you should expect to incur minor maintenance expenses at first. One mistake some property owners make is expecting a joy ride and therefore forgetting to save for the larger expenses that may arise at any time.