Real estate investors buy homes to serve as rental properties or homes that they want to renovate and resell at a profit, or flipping, as it is called. If you’re thinking about purchasing an investment property, you might want to spend some time learning about the process and how it differs from traditional home buying. Real estate investing is a business, and as such, investors must report their profits and expenses on their tax returns. The ongoing property management of the investment also requires learning new skills.
Atlanta real estate investor resources
The Atlanta area features an incredibly supportive and active real estate investor network. Organizations such as the Atlanta Real Estate Investor Alliance and the Georgia Real Estate Investor Alliance feature groups for those who are new to the business. They also offer ongoing workshops for local real estate investors. Consider attending a conference or monthly meeting before your first investment. Seasoned investors, financial professionals and real estate agents can answer your questions about the costs and benefits of real estate investments.
Selecting an investment property
When selecting a property, investors focus on different characteristics than traditional homebuyers do. Investors seek out homes sold at a market discount, often in “as-is” condition. While traditional homebuyers may have problems seeing past cosmetic issues, such as unusual paint colors or worn flooring, successful investors can quickly price cosmetic upgrades and calculate potential profitability. Investors should also be familiar with the rental rates for houses in neighborhoods where they are considering a purchase. If investors are looking to flip a home after renovating, resale values are particularly important.
Financing is another key to a profitable real estate investment. Some investors purchase a home with the intent of using the rental income for current personal expenditures, while others are happy to take a loss on a property in the short-term and build up equity for a future period, such as retirement. Because investors are viewed by banks as riskier customers, they are often subjected to higher interest rates. To avoid financing issues, many investors use cash financing or existing lines of credit to purchase investments.
Every day that an investment property sits empty means a loss in profitability to an investor. All repairs and renovations must be completed quickly in order to have the fastest turnaround. This means investors need to build a reliable network of contractors to assist them. Even with quality contractors, investors typically spend a significant amount of time working on houses, selecting paints and flooring, purchasing appliances or attending to the other details required to transform a home. For those investors who truly wish to be hands off, hiring a property management company is the best option, though the cost can bite into profits.
Real estate investments provide diversification to a retirement portfolio and provide a balance when the stock market slides. If you’re thinking of investing in real estate, it’s a good idea to attend a local workshop before purchasing your first property.
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