Do you know the six things to consider before buying your next income property? Calculating your rate of return before you even start looking is one critical step that savvy investors consider. An experienced commercial real estate broker can help you calculate your rate of return and evaluate the critical issues. This article does an excellent job outlining the major issues as you consider a property for real estate investment:
6 Important Things You Should Consider Before Buying An Income Property
Becoming a landlord may sound tempting, but it’s not for the faint-hearted. Consider these six factors before taking the plunge.
The article explores six major issues related to property investment:
- Your own financial position
- Your expected return on investment
- Finding the right real estate agent to help you
- Understanding what you should expect from an investment property
- Taxes
- Finding and keeping good tenants
Here’s what Lawler says about ROI:
To get an estimate of your first year ROI, subtract the annual principle and interest you’d pay from your total estimated net income from the property (which includes potential rental income, estimated tax savings, projected property appreciation and any estimated additional equity from renovations). Then, divide that number by your down payment, assuming that closing costs and taxes are already rolled into your mortgage, and rehab costs.
Understanding what tenants are looking for is critical. Amenities can make a huge difference. An experienced commercial real estate broker can help calculate what your rate of return would be if you did a value-add process.
Would you be able to increase rents by $100 to $200 per month if you rehabbed the units? It may sound like a costly process, but I can show you how to quickly calculate that information and see if spending the money upfront would be worth it in the long run with increased net operating income. The professionals at Pacwest Commercial Real Estate are Eugene multi family and student housing experts. Call us today if you would like to discuss this further at 541-912-6583.
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