“Progress always involves risk. You cannot steal second base and keep your foot on the first.”-Fred Wilcox
Real estate investments have been invariably considered as one of the excellent avenues for making profit.
In fact, it is always associated with a lucrative venture and is seen as a great moneymaking endeavor. When you have purchased your rental property, it would be as if you have poised yourself for financial freedom. However, while real estate investments may be considered as a great way to earn proceed, it is in by no means an easy and quick track to producing profits. After all, apart from having a particular business acumen in real estate, a great deal of patience and determination is also required from you. Moreover, trying your hand at real estate investments does not mean you can arbitrarily select properties and put them for sale then expect them to rake in revenue. Apart from doing your research, you need to be incredibly hands on in the initial phases of your endeavor. Remember, making money in real estate is so much more than just purchasing the first decent house you see.
While home improvement shows may show you that flipping houses is as simple as buying dilapidated properties and giving them cosmetic makeovers to improve overall function and aesthetics, real life is so much more than that. What they depict on TV may not even be necessarily what would occur in real life.
In any case, whether you are planning to turn your Makati condo (or property elsewhere for that matter) into a rental investment property, here are some things you ought to keep in mind:
- Condition of the house
Of course, buying a fixer-upper probably means that the property you are going to be buying would be run-down or at least be a little beat. However, you need to set some realistic expectations about how much time and money you are willing to invest in order to make the downtrodden house attractive again. At the very most, you should go for the home that requires minimal repairs and cosmetic touches and then have it thoroughly inspected by a qualified professional. Moreover, you also need to ask yourself how many of these repairs would you be able to realistically do on your own and how many would require the expertise of a contractor.
- The 1% Rule
While every real estate investor is entitled to his or her own financial goals when it comes to returns, it is a universal agreement that the income of an investment property should at least abide by the 1% rule. This means that you need to make at least 1% of its total purchasing price when you bought it every single month since you have sold it. The only time you can overlook the 1% rule is when a neighborhood is drastically changing or rapidly improving. In this regard, you can expect home values and rents to significantly increase over a short amount of time.
One of the primary things that a prospective tenant would consider in renting out a home or apartment is the location. In fact, it may even be said that the location of a house is just as important as the house itself. In this regard, it would be wise to select an area wisely—particularly if you are potentially considering a tenancy. Choose an area where you tenants would want to live. Ideally, this should be somewhere not only safe but also in proximity to major offices, schools and entertainment hubs as well. Choose a neighborhood whose crime rates are not too high. Moreover, be on the lookout for communities with well-manicured lawns and aesthetically painted homes as tenants will be more receptive in living on a street with excellent curb appeal.
If you wish to market your tenancy to families, have a look at the local school district and ensure that they are within reasonable distance from the neighborhood you have chosen. Parents with children are more likely to rent from areas that have well-ranked schools close-by. Alternatively, if you wish to market your rental property to students, ensure there is a nearby university as this will guarantee a strong rental market.