It’s exciting when you decide that it’s the right time to grab your first investment property. However, if you’re new to these kinds of purchases, it’s also intimidating. Fortunately, as our experts understand, you can handle everything properly if you know how to approach it.
Finding the Right Investment Property
Calling the housing market hot can feel like an understatement. The median sale price for residential properties in the US was just over $408,000 at the end of 2021 and home prices across the country year-over-year (YOY) still exceed 20%, according to CoreLogic. In the Greater Scranton market, median home sale prices have been trending up at a YOY rate of 13.8%, more than the increase from a year prior (July 2020 to July 2021).*
By and large, prices have trended upward for the past few years and it isn’t uncommon for buyers to spend over list price, with some going for many thousands above list.
However, the price can vary throughout a particular area. Overall, each neighborhood can come with its own vibe and price point. As a result, where you buy matters, both from a cost and desirability standpoint.
When searching for investment properties, be sure to partner with one of our real estate professionals. They can help navigate the particulars of purchasing a home in Northeastern Pennsylvania.
Features of Desirable Properties
When looking for investment properties, you need features that appeal to renters. For example, ValuePenguin notes that 53% of consumers want a home office over an extra bedroom. In some areas, open floor plans may typically be preferred. For downtown properties, a parking space might be a necessity, too.
Since traffic can be challenging, finding a location near convenient roadways or close to critical amenities like stores or medical centers (or even pizza!) is also essential. That way, renters won’t have to go far to get what they need.
If you’re looking at family-sized residential investment properties, then choosing one with exceptional school ratings is a smart move. That’ll make the home more attractive to parents, increasing its potential value.
The same goes for homes with large yards. Whether it’s parents or renters with dogs, having outdoor space may be high on the list. If the yard isn’t in great shape, making some outdoor improvements may be all it takes to elevate its curb appeal.
For instance, you could connect with local contractors to install a new fence, if it’s allowed by your homeowners association and/or the local municipality. Ensure they’re licensed, insured and check for underground utility lines. Next, read reviews online. Then, reach out to discuss your needs and get a quote. While the average price can vary (and it usually does in this market with distribution and supply issues that contractors typically encounter), the size, materials and location play a role, so get several estimates in advance to ensure you’re in the ballpark.
Managing the Investment Property, Beginning with Forming an LLC
Before getting into the investment property business, make sure you’ve set up a limited liability company to operate under. This will help protect you from personal liability, as well as confer tax benefits to you. You can accomplish this relatively simply by using a formation service. Once you find the right property, then you’ll need to determine how to manage it. Usually, you have two choices.
First, you can operate as the landlord, and as such, you’re responsible for all activities relating to the lease property. Along with advertising the property, you’ll screen tenants, collect rent, handle maintenance calls and more. In some cases, that also means enforcing the lease – a task that often lacks enjoyment and may not always go as planned – and handling evictions, if needed. It’s a full-plate for sure, but it’ll allow you to keep all of the profits too.
Second, you can hire a property manager. By using this approach, you’ll end up with less profit in exchange for support handling the property. The property manager will handle practically most everything, including screening tenants, accepting payments, tackling repair requests and the like. They’re also an ally for lease enforcement, ensuring you don’t have to address violations directly unless an eviction becomes necessary.
Which option is best depends on how hands-on you’d like to be along the way. While you’re always involved, a property manager reduces your burden in exchange for a fee, giving you access to support and expertise. However, if you’re confident in your capabilities, that may be unnecessary, as many investors manage their own properties.
* statistics from the Greater Scranton Board of REALTORS® (July 2020-July 2020)
[This content is compliments of Fix It Dads.]