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3 Essential Tips for Moms Investing in Real Estate

Posted 1st November 2017 by tammywy

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Real estate has made more millionaires than any other avenue because the tax laws are so generous with rental income, capital gains and capital appreciation. Rental income generates a steady stream of revenue as long as you have tenants, and people always need a place to live. Yet you can be wiped out if you make a major mistake. Here are 3 essential tips for moms investing in real estate.

Conceptual, Wooden, Decorative Letters, Heart

Realize How the Business of Real Estate Works

You cannot take in tenants based on sob stories instead of running background checks, credit checks and references. If you take in a tenant you feel too much empathy for, you’re the one who has to pay the mortgage, insurance and taxes even if the tenant isn’t paying the rent. Also understand the business side of rental real estate, the most basic tenet of which is “earn significant positive cash flow”. I say significant because a $100 a month margin is wiped out when the hot water heater breaks.

You have legal minimum standards to meet like working air conditioning and heating and safety elements like doors that lock. Do what is necessary to meet these standards. However, it is a mistake to try to turn a rental home into a beautiful show home – you’re renting, not flipping.

Mixing Up Home Renovations and Rental Properties

While you can buy a house to fix up and then hope to rent it out for enough money to recoup your repair costs and purchase price, this is a risky strategy that can destroy your return on investment. If repairs turn out to be more extensive than expected or take longer than planned, you’re losing money. It is safer to buy turn key real estate that is already livable and ideally already has tenants living in it. Now you don’t have to find someone to survey the cracked foundation and determine if it needs to be repair or shored up, because the home is already habitable.

Unless you’re a building contractor or have a good relationship with one with a proven track record, don’t buy fixer-uppers to try to repair and then rent out. A few minor repairs or cosmetic issues to be fixed is acceptable, but a home in need of major work is best left to someone else.

Understand the Market

The ideal rental property in suburban areas is a three bedroom, two bath home between 1600 and 2000 square feet. It is small enough for a couple or the average family on a budget. It is attractive both in terms of space and rent for someone living in a large apartment. Properties close to schools, parks and public transit are worth more. If you understand what renters value, you’ll know which properties to seize and how much you can rent them for.

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