As someone looking into investing in residential real estate, you need to figure out what kind of properties will be most profitable. Typically, the choice lies between single family homes, and apartments. Both offer different benefits and require different levels of investment so it’s important to do research on what will serve your market (and your budget) best.
With apartments, you definitely have lower cost-per-unit than if you were to buy multiple houses as investments.Even though your cost-per-unit is lower with apartments, the startup cost is much lower when you invest in single family homes. Buuuuut…if you invest in an apartment building, you really have no choice as to how many properties you’ll be managing, it’s pretty much all or nothing. With houses, you can pick the number of properties you want to invest in and go from there.
As far as managing the properties, there’s definitely more of a need for a property manager when you’re investing in apartments. With a house, or houses, it’s pretty much your responsibility to deal with the tenants and properties, because hiring a property manager is not a cheap deal if you’re only renting out a few houses. Now that we’re talking about dealing with tenants, you should recognize that those who rent single family homes are usually long-term tenants; those who rent apartments typically do not expect to stay there for an extended amount of time.
Basically, look at how much you’re planning on investing in start-up costs, and whether or not you want a property management company to work with or not, and go from there.
As a property manager, you always have toooons of room to expand your business. But, the question is, how do you expand?
Before anything, make sure you have a stable and organized property management business. Imagine if you have a house that doesn’t have a stable structure, do you think it’d be a good idea to expand it? Probably not. This same thing applies to business expansion. Without a stable facility, expansion isn’t in your best interest. Make sure your business is stable and that you have a good team, and good tenants.
A huge component in expanding your business lies within social media. A while back we talked about harnessing the power of social media for real estate, and as a property manager, the same tips are applicable to you. Using social media will give you followers beyond your tenants or direct business partners; it’ll let more people know what you have to offer and how they can get in on it. Maybe you can create a specific hashtag that your tenants can use to share your site across social media platforms, like Facebook, or Twitter.
Once you have maintained a strong and stable property management business, it may be time to physically expand your business by adding more properties. If you have the financial capacity to expand and have planned accordingly, look into similar properties that you can see as good investment options. Or, if you want to branch out of the property management route you’re currently taking (residential or commercial) and see what other kinds of properties would also work in your area. It’s really important to research the specific market that you’re working with and see what the needs are so that you can find a property that meets those needs.
Why you need to be careful before investing in the real estate market
It’s no secret that the real estate market has loads of great investment opportunities for realtors and consumers alike. But as we all know, sometimes things are too good to be true. Before you take the plunge and invest in what seems like a great real estate venture, there are a few things you should consider.
Is this property as good as it looks at first glance?
A property may look great when you first see it, but you can’t guarantee that there aren’t any underlying issues. Imagine if you look at an apartment with carpeting, and it looks great…but then summer comes along and mold starts to grow because the property had water damage, something that you didn’t know about because you can’t really see that when you preview an apartment. It’s important to fully check the property to make sure that it has no previous damages or anything that may be on the verge on breaking.
Will you find a tenant/tenants for this property?
You need to consider that not all properties are easy to rent or easy to find tenants for. Before you invest, look at the market and area where the property is located and determine if there is potential for you to find a tenant. You don’t want to spend a ton buying a house to rent, and end up with no one to rent it.
Consider the long-term risks
Make sure that you look at costs that may show up later on in your investment! Short-term costs are important because you need to handle them immediately, but long-term costs can sneak up on you and set you back. Plan out the investment so you’re aware of any expenses that may come up.
Earlier today, Sears decided to change up the nature of its business and dabble in the real estate game. Sears, which has had retail locations all over the United States since 1925, is now selling some of these locations, along with Kmart locations to balance out their finances. Sears plans on selling some of its best properties (a whopping 254 stores!) and leasing them back. The department store chain is working out the deal with Seritage Growth Properties, who will buy the properties lease them back to Sears. Sears is also working out a real estate joint venture with General Growth Properties, the number 2 mall owner in the United States. The joint venture involves Sears receiving $165 million dollars and fifty percent ownership of the venture, in exchange for 12 of their locations in General Growth Properties’ malls.
Some think that Sears isn’t making the right move in its new real estate venture, but it seems like it could definitely help them. We all know that real estate has definitely grown since the economic slump in 2009, and commercial real estate is no exception. Sears isn’t putting its name or brand at stake, its just restructuring its assets (both internally and externally) through effective real estate. It’s interesting to think that such a huge company is using real estate to turn itself around; could it be possible that other companies will follow in Sears’ footsteps?