Investment in real estate is one of the most secure ways to add to your long term retirement plans. Whether you are investing in a property as a second home or investing in a second home as an income property will help determine your level of investment, the location of your investment and how you manage that property. Here are two things to think about as you research the change to be a property investor.
Future Home or Strictly Income
The first step in property investing is determining the purpose of your investment. Are you looking for a vacation home, a home where you would like to retire or a home that is strictly for income? It is important to make this determination early on for a few reasons. Think about where you like to vacation. Does the property have a lot of amenities? Is it near nightlife, shopping or a high traffic area? Is the location fully furnished? If you are purchasing a home in this type of location, the expectation of future renters is that your home will have all these bells and whistles. All of these “extras” come with a price tag which could mean high HOAs, significant costs for upkeep and maintenance of the property. If the second home is meant to be a retirement home, you are now looking at the purchase through a different lens. This could mean that the property, while idyllic to you, may not be in a location or have the amenities vacationers expect and therefore command a lower rental fee.
Determine the level of property management for your investment purchase or it could cut into your profits. The range of services offered by property management companies varies from marketing/advertising for clients to background checks to onsite assistance with renters. Other property managers just specialize in helping with the upkeep and maintenance of your property. Because the range of services varies, so do the fees. Some property managers charge a monthly flat fee, regardless of the rental income, while others charge a percentage of the total income and still others charge for services rendered like fixing the kitchen sink. How much do you want to be involved with the daily management of your property?
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