There is no doubt that real estate is a fruitful and lucrative market. So, investing in Hampton Roads real estate should be a no brainer.
But why is Hampton Roads real estate market so hot right now?
Generally, investors have been attracted to apartments over other types of properties. This can largely be attributed to the cap rates which have gotten tighter in other markets such as those in the Southeast and mid-Atlantic.
During the 1st quarter of 2019, high-net properties were going for about $172,000 per unit, which is about 50% more than what the average apartment would usually cost.
This high-impact asset trading is expected to continue pushing up the average pricing. Rents prices are also on an upward swing, and are expected to exceed the $1,000 per month benchmark.
With the basics of the Hampton Roads market covered, here are 7 top tips to help you when buying an investment property.
1: Buy in the Right Location
Location still rules when it comes to real estate investing.
Ask yourself the following questions when looking to invest in any property.
• What are the crime rate in the area? You should always aim to invest in a location with a low crime rate
• What are the schools in the area like? Invest in areas with top rated schools
• Are amenities like restaurants, supermarkets, parks and transport hubs located in close proximity? These kinds of amenities attract renters
• How’s the economy performing in the area? Are businesses shutting down? It’s always in your best interest to invest in an area where the economy is doing well
Read our post here to learn about the best cities to invest in!
2: Choose a Single-Family Home
If you’re new to real estate investing, consider investing in a single-family home. This is because dealing with a single tenant or single property is easier to manage.
If something at the rental unit breaks, you’ll only need to take care of it once.
What’s more, there is less wear and tear when working with a single tenant.
After the housing market declined in 2007, single-family homes have become the go-to option for investors.
Single-family rental homes have also grown by about 30 percent within the last couple of years, with rental prices steadily rising as well.
3: Buy a Rent-Ready Property
As a first-time investor, it’s in your best interest to look for a property that’s tenant ready.
Buying a fixer upper could delay the process of renting out the property and could incur unforeseen costs.
Remember, your goal should be to get the property into an income-producing state as quickly as possible.
However, there is an exception. If you already have experience renovating houses, then buying a fixer upper can be a great option. You could buy an inexpensive property and drive up its value immensely through the renovations.
4: Do the Math
Will the investment property be able to pay the mortgage?
When investing in real estate, you should always let the numbers speak for themselves. If the rental income can meet all the costs, including the monthly repayments, then you probably have a good deal.
You should consider using the 2% investing rule to help manage risks on your investment.
It recommends that the monthly rent be equivalent to or higher than the total purchase price for an investment to be considered a good or safe investment.
So, for a property worth $100,000, the rent collected needs to be at least $2,000 a month or higher.
Besides the income, you’ll also need to look at the operating expenses. Remember, your profit is equal to the gross monthly rental income minus your expenses.
To calculate your expenses, consider the 50% rule. According this rule, expenses amount to 50% of the total gross monthly income.
So, with a gross monthly income of $2,000, expect the expenses to amount to about $1,000. And this is not including any mortgage payments!
5: Have a Marketing Strategy in Mind
If you are investing in a vacant rental unit, it’s important that you have a marketing plan in mind. Remeber, owning an investment property doesn’t mean you’ll automatically have tenants.
So, have a plan of attack for advertising the property. Nowadays, simply placing “For Rent” signs outside and using newspaper ads won’t cut it.
To succeed, you’ll need to make use of a variety of tactics, including major online real estate marketplaces.
6: Draft a Detailed Lease Agreement
When renting out a property, having a solid lease is crucial. It will help safeguard your interests, as well as help eliminate potential squabbles.
For example, when it comes to rent payments, you can include details like:
• When the rent is due
• Acceptable form of payments
• The cost of a late fee, if you’ll be charging one
• The duration of the grace period
• What happens if a rent check bounces
7: Screen Prospective Tenants Thoroughly
One thing that's vital to making your rental property succeed is knowing how to properly screen tenants. Every tenant experience will be different.
Most tenants will be every Hampton Roads landlord’s dream, but you still have a risk of running into an unpleasant dispute. Tenant screenings are the best safeguard against this.
A good screening process is one that checks and verifies the prospective tenant’s:
• Monthly income
• Credit rating
• Rental background
• Employment background
• Criminal record
• Eviction history
You should, ideally, begin this process following the first contact you have with the prospective tenant. This is usually during the property showing. So, prepare some pre-screening questions.
Property investing in Hampton Roads requires time, effort, dedication and, most importantly, the right people. Luckily for you, these 7 tips should help set you up for success.
Check out Rent Easy for more information!