THINGS YOU  NEED for successful property investment

1. A clear idea of your objectives - Do you want to be renting to high end clients or low cost. High end renters are more likely to pay their bills on time; low end renters tend to be less demanding and easier to find.

2. Short term or long term rental? – In Pinehurst there are good opportunities to have a vacation rental. However, vacation rentals need more attention. Property management fees range from 20% to 30% of the rent you receive. And if you use VRBO and the like, they will eat up a big piece of the pie with their fees.

3. Be ready to move quickly – Being able to respond quickly and make an offer on a potential investment is essential. Having mortgages pre-arranged and funds available to meet closing costs can mean your offer is accepted above others.

4. Knowledge of the market and the buying process – You need to be knowledgeable about the market you are investing in, and the real estate buying process, or have someone who does.

5. Understanding of the costs involved – It is much more likely that you have underestimated the costs than overestimated them. For that reason, you need some contingency in your budgeting. Better to let an opportunity go than rush into it with a high level of risk.

6. Broad understanding of landlord / tenant laws – if you don’t have a property manager, obviously you will need more than a broad understanding. But for example, if you think that a tenant who leaves a lease early is obligated to pay the remaining term in full, you will be disappointed. Having a high level of what is and isn’t allowed will help you avoid some of the bigger pitfalls, and give you a realistic expectation of what your true return will be.

If you would like to know more about these, give us a call.  

THINGS TO BE CAREFUL OF when it comes to property investment

The following are five of the most common mistakes we see a lot of property investors making:

1. Thinking every opportunity is a good opportunity - Knowing when to walk away and when to walk in. The Navy Seals have a saying, “Indecision is the key to flexibility.” In other words, if you go into an opportunity and it is wrong, it is much more difficult to reverse out of it. Foreclosures and FSBO’s, for example, often seem like a good idea. But the effort involved and opportunity cost may erase all possible benefits and more. And it is important to recognize that there is a big difference between a good house and a good rental.

2. Paying too much – This comes back to how much money you will actually make on the deal. If you look at the column on the right hand side, you will see some of the key metrics that may conspire to reduce your return. The two numbers investors get most wrong are the actual rent the property will get (as opposed to what the seller said or what someone else thought), and the cost of refreshing the property to make it rent ready. It is also important to factor in all the cost of the purchase, such as mortgage appraisals, inspections, and other fees. 

3. Relying on it renting quickly - Or being overly optimistic of rental values. Even if you have the rent set just right, it may take a month or two for the right tenant to come along (try putting your property up for rent in December and you will know what we mean). As property managers, we have a database of over 5 years of rental history for Moore County. Past rental values may not be an exact predictor of current values, but we are usually right within 5%. Getting the rental price wrong can leave your investment unrented for weeks, with bills mounting up and the ROI in shreds.

4. Not allowing any money for repairs – Some investors think that the rent is free money. The tenant does not see it that way. The tenant thinks they are paying for a well-maintained, clean, healthy home - and they would be right. That doesn’t mean you have to spend a lot of money. The secret is to spend it on things that are important to tenants. And another thing, fixing up is not just the cost of materials and labor. It takes a lot of management and oversight. Just so you know, we would be happy to oversee your remodel or refresh, for a small fee. There is an opportunity cost and it may shock you to know that not all contractors stick to their timetable or indeed the budget!

5. Thinking you can easily manage it yourself – No reason why you can’t. You could manage properties for others too. Just qualify as a real estate broker, do the specialist property management courses, keep up-to-date on legislation, keep your phone at all times for maintenance calls, arrange viewings at the weekends and so on. The point is, it takes a lot of time to manage a property. Experience really does count and, if you do find a good property manager (in other words, give us a call), they should pay for themselves many times over. You will then have the time to get on with your life and earn more money for that next investment.