Since the housing market crash has made home ownership difficult for many people, the demand for rental property has increased. If you are thinking about becoming a real estate investor there are some things you will need to consider.
Before you start looking for property to purchase, you will need to get qualified for financing unless you are paying cash. If you are not going to be occupying the property yourself you will need a 20-40% down payment depending on your lender.
Decide on an area where you would like to invest. If you are looking to invest in single family homes pay attention to school districts, proximity to parks, shopping and locations which would be desirable for families. If you are looking at multi unit buildings which tend to attract more singles than families, then schools and parks may not be that important. Develop a relationship with a Realtor that has experience with investors. They can keep you informed of the inventory and can help you decide which properties would be good investments. Look at as many properties as you can in your price range. That will help you determine market value for the properties you are interested in purchasing.
Most properties that are priced to appeal to investors will need some rehab. Be familiar with construction and remodeling costs so you know if having to put a new roof on a house is cost effective or not. If you can do a lot of the work yourself, the costs will be much less than if you have to hire contractors. When considering properties to purchase, foundation issues, wet basements and roof issues are seldom quick fixes and always cost more than you think. Especially if this is your first investor purchase, try to find a property with just cosmetic issues that you can tackle yourself. Paint, flooring and appliances are usually fast and inexpensive fixes and can allow you to get a tenant moved in and paying rent quickly. Empty properties donít generate any income so the goal is to get them in top rentable condition as soon as possible.
Remember to factor in all the costs of investing in real estate. Besides your mortgage payment and any rehab costs initially donít forget about property taxes, insurance, utility costs, lawn care, snow removal, legal fees, repairs and vacancy rates. If you happen to be unlucky enough to get a bad tenant who does damage to the property you may be responsible for repairing it so it can be rented again. If you lose a tenant or have trouble renting a property initially can you afford to have it sit empty for three to six months? If you have a tenant that you need to evict can you afford the legal fees?
If you are looking at owning rental property in the City of Freeport, be aware that the City has an ordinance requiring registration of all rental properties yearly. The fee per unit is $19 and you must live within 30 miles of Freeport or have a local agent to manage your properties. The ordinance also requires certain crime free language to be in your lease. The registration form and a copy of the Ordinance NO 2015-15 can be found on the City of Freeport website at www.ci.freeport.il.us.
The Freeport Area Landlord Association (FALA) is a local non profit educational organization for owners and managers of rental property in the area. There is a yearly membership fee which covers the member meetings, educational offerings, networking and more. For more information on this group you can visit their website at fala.wildapricot.org. Investing in real estate can be very financially rewarding if done properly. Do your homework and start with a manageable, affordable property and you could be on your way to a rewarding new career as a real estate investor.