Investing in a rental property is a great way to broaden your income stream. It is another way to diversify your assets outside of placing your funds in the stock market. Tax savings and property value appreciation are also advantages for investors.
Are you considering becoming a real estate investor in Dallas?
If so, this article outlines some tips for you as an interested investor.
You will often hear that location is key in owning a property. The best locations often have the highest demand for renters and buyers. As an investor, you should aim for areas with strong predicted growth. Dallas-Fort Worth earned the top spot of “US Markets to Watch” in the ‘Emerging Trends in Real Estate for 2019’ report. This signifies that investment properties in the area have the potential to bring in a strong stream of income.
Here are 10 tips to use when purchasing an investment property in Dallas.
1. Calculate your figures.
How much is your budget?
How much can you afford?
There are plenty of associated costs with purchasing an investment property.
Check for financing options. Ensure that your down payment is at least 20% so interest rates will be manageable. Factor in other fees you will be paying for on top of the price of the property. It pays to be realistic by calculating the numbers beforehand.
2. Conduct market research.
Doing enough research is always a vital step before investing. You want to learn about the area’s potential economic growth, market demand, and average housing rates.
Then you can narrow down which Dallas neighborhoods you are interested in. You will want to gather information about these neighborhoods as well. For example, average rent cost, local school ratings, crime rate, and average property value.
3. Think long-term.
As an investor, it pays to think long-term. Real estate is slow to liquidate. Manage your risks by adopting a long-term view. Give your property adequate time to appreciate in value. Patience is key when investing in real estate property.
4. Invest in single-family homes first.
If it is your first time investing in real estate, consider choosing a single-family home. It is more manageable and less overwhelming than a multifamily or commercial property.
You can focus on a single tenant and the wear-and-tear of your furnishings will be minimal. Keeping your property in top-notch condition will also be easier.
5. Check the neighborhood.
It is important to conduct preliminary research before purchasing a rental property. Talk to the residents around the neighborhood you are interested in. Ask the tenants what they liked about renting in that particular neighborhood. This should provide you with insight into the target demographics of the area. Doing so will help you when you rent out your property.
Drive around the area both at night and during the day. This will help you analyze the selling features of particular neighborhoods. You can also consult real estate agents to get insider information.
6. Schedule a property inspection.
Once you have selected a particular property, hire a professional building inspector. This is essential to check the age and condition of the property and facilities. Conducting an extensive inspection allows you to assess problems before purchasing. You can then decide how much you need to spend on necessary renovations. This lets you assess your financial budget in addition to the purchase price of the property.
7. Buy a rent-ready property.
If you do not have a lot of experience with home renovation, it is a good idea to purchase a rent-ready property. It can be costly to renovate, so you want a property that needs the least amount of work possible. Your aim is to earn recurring income from your rental property. The sooner you initiate cash flow, the better. Return of investment is a priority and finding ways to spend less is recommended.
8. Choose a location near amenities.
The best thing about properties located near amenities is that demand for it will always be high. High foot traffic rates in the area will also allow you to fill your vacancy quickly. It is also faster to narrow your target market based on the amenities nearest to your property.
For example, if it is closer to a university, you can focus on renting to students. If you are located near a hospital, you can choose to design your rental unit for medical professionals. Or you could offer short-term rental for the convenience of visiting families/friends.
9. Learn to negotiate.
Be ready to negotiate a good deal with investment property prices. For example, if there is a pest control problem, you can ask the seller to address the issue or reduce the price. This will ensure you get the best investment deal.
10. Arrange finances before making offers.
Before making an offer, consider your payment plan. It is not recommended to make offers without having a concrete financing strategy. Check with your bank, money lending institutions, and/or private lenders for financing options.
Investing in Dallas can be very favorable. The area’s low taxes, great business climate, population growth, and low cost of living are highly attractive. There is also an abundance of properties available to choose from.
Always take time to research the area, balance potential costs, and negotiate to get the best deal possible.
If you have any questions or would like more information about investment properties in Dallas, you can contact us at McCaw Property Management by calling (817) 491-2553.