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Getting Started With Property Investment

Man holding a miniature home

Image by Gerd Altmann via Pixabay

Purchasing a home to use as an investment for income potential is often a great way to make a profit. Whether you opt to “flip” a house (buy and resell), or use it as a rental, investment properties can become lucrative when the buyer does their homework and makes a purchase that can offer a high rate of return.

Finding a Property with Potential

An important factor when buying investment real estate is finding one that will offer you a sufficient income with the least amount of repair. Most people who are planning on flipping or renting a property look for the least expensive homes and expect to make upgrades or repairs to make it more marketable and increase the value. Make sure you consider the costs associated with repairs. A home that needs excessive renovation will significantly reduce your profit levels and take much longer to recoup losses.

Hiring a home inspector can offer insight into the repairs that are needed so you can make an informed decision. Large renovations that involve structural repairs are more costly, so be sure to examine the home’s foundation, sills and trusses. Common issues in older homes include roof repairs, siding and insulation upgrades, and lack of gutter maintenance. Because faulty gutters can quickly lead to larger problems, locate nearby gutter cleaning services to deal with the task regularly. Consider obtaining estimates for the repairs, or use estimate software to get an idea about the costs of renovating and whether the amount you can earn is worth the expense. Once you have decided on a home, obtained financing and made the necessary repairs, it is ready to earn you money.

Managing Your Property

There are many approaches you can take for managing an investment property. If you are thinking about renting it out, there are management companies you can hire that deal directly with renters and make repairs and collect monthly payments as part of their percentage fee. You can also deal with renters directly to save money, as well as make your own repairs to save labor costs.

Entrepreneurs with investment properties should consider securing landlord insurance. Purchasing landlord insurance provides you with peace of mind that if your property is unable to be rented for a period due to repairs, you are protected from income loss. In addition, it covers expenses related to tenant injury and may save you a lot of additional fees for hospital bills and associated costs. As a property owner, it is imperative that you protect yourself and your personal assets.

Protecting Yourself as a Property Owner

Aside from obtaining landlord insurance and hiring a management company to assist you with rent and repairs, it may be wise to consider additional protection for your personal property. As a landlord or investment property owner, you can further protect yourself by forming a business and filing as a Limited Liability Company (LLC). This type of business formation not only protects your personal assets in the event of litigation or catastrophic loss, but it also offers tax advantages that can put more money back into your pocket.

If you opt to file for LLC status, check the requirements, as they differ depending on location. Entrepreneurs can start an LLC in Arizona independently, hire an attorney, or save a lot of time and financial resources by using a formation company to complete the process. As you begin your property investment adventure, use a dependable real estate agent with plenty of experience. Real estate investment is often a great way to earn passive income if you invest carefully.

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