Investing 101 – Getting started
Here is the first of a once-a-month column I will present on being a rental property owner. You do not have to manage properties for this information to be relevant, though we will deal with management aspects of investing.
The first thing to figure out is what you want and there are probably more options than you realize. If it’s residential rental property you are after, you must decide whether you want to own multi-family properties (duplexes, four-plexes, etc) or single family homes. If it’s single family, do you want properties that will appreciate over time but may not provide excellent cash flow? Is your plan to build an inventory of cheaper homes that get good cash flow? Do you want to include townhouses and condos in the portfolio? Do you want to diversify and have a little bit of everything?
Now the question becomes where do you want to buy. I hear a lot of investors say that want properties in the county to take advantage of lower property taxes. Some want properties only located in certain cities. Going further, some limit prospective purchases to specific school zones. Is the goal to keep properties in a small radius or do you wish to expand the geographical footprint?
This is just the beginning. Now it gets fun. Once you know type and location you must decide specifics of the property (size, beds, baths, single level, 2 story, bungalow, rancher, contemporary). What about the structure itself? Full brick, frame, stucco siding, vinyl siding, slab foundation or crawl space?
Moving on….do you want a move in ready home when you get the deed or is a full or partial renovation in the works? How much work are you ready to take on? Do you have the time? Do you have the money to pay for the labor if you don’t have the time?
Last but not least, what do you envision your rental property looking like?Updated? Don’t care as long as the money flows in? Built to last? Carpet, hardwoods or laminate? Should I install expensive blinds? Should I, should I, should I?
The possibilities are endless. If you are already overwhelmed then mission accomplished. Take some time and go through this step by step. Decide what makes you comfortable. It isn’t supposed to be easy and there is no perfect plan. Everyone must make their own path and decide what works for them. Yes, mistakes will be made. Many mistakes will be made. But don’t be afraid. Doing nothing is the worst thing you can do. College teaches us what we need to know but once we get to the first job, none of what we learned in school seems to help. We can study about investing all we want but until the first purchase is made we really have no clue. I know people that have studied real estate investing 5, 10, 20 years and have never pulled the trigger and bought a property. They are too scared about the what ifs. Perhaps this is not for you. I know one thing – if you never step out and try you will always wonder…. what if.
I’ll explain some things that work for me next time. Stay tuned….