Tuesday, July 8, 2014

Investing in real estate.

Investing in real estate -

I recently read an article from NewsGeni.us that I found quite interesting, dealing with real estate investing.
Without repeating the whole article here I thought I would comment on some of their points:

Their advice is:

Focus on promising areas - the clientele in the SF Bay Area has been well served by believing in the local area in the past 30 and 40 years. 5 years ago though a lot of people got scared and some sold, or did not buy when they could have.  For those who bought when no one believed in it, I say “bravo”!  However the Bay Area is just one choice, mostly based on price appreciation, not return.  Indeed until very recently, the return on investment was not great - purchase price very high, rental fairly low. 

I personally chose another route: an area with very little appreciation, but with traditionally good return .  With the help of an investor mentor (thank you Louis!), my family invested in real estate in Texas.  There, the gross return was more like 10 to 11% per year, as opposed to ~3% in the Bay Area at the time.  The area was promising because of the job market, which had been very consistent, and strong.  Since it continued to be strong, the rental market stayed strong.

Never spend more than you can afford - unless you buy cash, mortgages start to add up when you purchase rental properties.  You have to count on a few set-backs, like damage due to weather, vacancies, repairs tied to finding new tenants, etc…  if you do not have reserves, it can start becoming a stretch.  Plan on a certain amount of unknowns, and I would say, plan generally on costs being higher than they should be.  (like insurance costs….).

All of the advice is well taken in this article called “When is the right time for investing in property?” .   I would add another item: choose a good management company (if you are going to invest away from where you live, or if you do not plan on managing yourself).  This is essential to staying out of trouble, so-to-speak.  That company should be used to missed payments and how to deal with them, and they should be well organized and standardized in their procedures.  Getting referrals or testimonials is very important in my opinion.

If you are thinking about investing in real estate, share your thoughts with me - I’d love to help you out with what I learned so far on the matter.

Thanks for reading,

Francis
Trends: Local prices and graphs.
A noteworthy local non-profit event:  Coalition on Homelessness, SF

3 comments:

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