Any experienced real estate investor will tell you that knowledge is the key to sound investments.
While it’s true that real estate has made many people rich, success is not guaranteed to those who go into it blindly.
To get your investment journey started on the right foot, here are a few solid tips for buying investment properties in Reno, Nevada:
1. Find the best location.
Location, location, location has become a mantra in real estate.
And there’s a pretty good reason for it.
Basically, the location of a rental property determines a lot of things including:
- How much you can charge for rent
- How fast you’ll fill your vacancies
- The rate at which your property appreciates in value
- Access to basic utilities
- Your property tax-bracket
So, it’s safe to say that location is a crucial factor to consider.
Look for investment properties in Reno, NV that are close to schools, amenities, workplaces, recreational spots, and so on.
Also, make sure you factor in things like crime rates and basic infrastructure.
2. Ensure that you can afford it.
Any wise investor will advise you not to invest in anything you can’t afford.
Well, for one, you could end up with a half-baked investment. This could simply be because you ran out of cash before fully preparing the rental property for occupancy.
To avoid this, make sure that you buy an investment property that’s within your financial capability. Remember that – even after you finalize the purchase – you’ll still need money to:
- Prepare the property for occupation
- Advertise your vacant unit(s)
- Screen and do background checks on tenants
- Deal with mortgage expenses – if applicable
3. Prepare your finances.
How do you intend on paying for the property?
By using your own cash or a mortgage loan? If you are financing everything, that’s fine.
But for those depending on mortgages to buy an investment property, you may have to do a few extra steps:
- Paying down your debts
Having debts isn’t a sin. But when it comes to borrowing loans, it may have a negative impact on the outcome.
That’s why, before applying for a mortgage, make sure you clear your student loans, medical arrears, or any other debts you may have.
That way, you’ll improve your credit score and increase your chances of getting a good loan.
- Secure a sizeable down payment.
Most lenders expect you to put down at least 20% of the overall cost as a down payment. That way you’ll get better loan terms.
Lower down payments often seem risky to the lender. And that’s why they may be forced to give you strict loan terms in order to cover the risks.
- Save at least 6 months’ worth of cash
During the first few months of buying your investment property, expect that you won’t receive a lot of income.
You might end up spending more time trying to get new tenants for your property than you expect. So make sure that you save some cash for that risk.
4. Buy a low-cost investment property in Reno.
Sometimes buying an expensive rental property can be tempting.
That’s because the cost of buying is almost always directly proportional to the price of rent.
And that is mainly because a property’s price is dependent on a number of things including its location, features, design, size, and so on.
But what most first-time investors don’t know is that the higher the cost of the property, the higher it will cost to maintain and repair.
So, you may end up spending a lot of money to keep the property in good shape as you search for tenants.
5. Calculate your ROIs.
In any investment, your ROI is always a crucial point of consideration.
You want to know how much you are going to make from the investment before closing the deal.
So, you need to find out how much returns you can estimate from the property each year.
Reno property experts say that anything above 6% on the first year indicates a good investment.
6. Come up with operating expense estimates.
Just how much will it cost to run the rental property?
On average, property operating expenses in Reno range from 35% to 80%.
Make sure that the potential property’s expenses won’t take the lion’s share of your total rental income.
7. Make sure you can handle owning and managing your investment property.
Is it for you? Can you handle the stress, responsibilities, and work that comes with managing rental property in Reno, NV?
Owning a property is easy.
The real work is in your property’s management.
Unlike other forms of investment, rental properties can be very demanding. Not to mention the fact that some tenants can make your life… difficult.
Are you up for the challenge?
If you choose to self-manage your property, you’ll a to-do list that includes:
- Advertising your property.
- Screening tenants and doing thorough background checks.
- Maintaining and repairing damages on the property.
- Dealing with tenant complaints.
- Collecting rent every month.
- Evicting bad tenants.
- Handling the legal aspects of the property.
- Filing taxes.
- Hiring service providers.
- Supervising on-site employees and so on.
If you’re a busy person, a lot of things can go wrong if you neglect your property and the responsibilities that come with it.
Plus, this could also mean that you will have to live in Reno, Nevada yourself in order to tend to your property’s needs with ease.
But, before you give up on the idea, there is a solution to this. Consider hiring a property management company.
Property managers can handle all the responsibilities above and more giving you more free time, convenience, and flexibility.
8. Understand the pros and cons of investing in real estate.
To make sense of all that comes with investing in Reno’s property market, here’s a short pros and cons list that can help your decision-making process:
- Passive income. Meaning, that you can earn from real estate while doing other important things.
- Mortgage interests are considered tax deductibles.
- Rental income isn’t subjected to social security taxes.
- Your investment’s value grows with time.
- You enjoy a myriad of tax benefits.
- Real estate is a tangible investment, unlike stocks.
- Tenants can be a headache.
- Rental income may not be enough to cover mortgage repayments.
- The first few months may be an additional cost as you search for tenants.
- Turnover costs can be high.
So, what do you think? Is investing in Reno’s property market a good fit for you?
Hopefully, the tips above will help make your choice a bit easier.
Use these eight tips for buying an investment property in Reno, Nevada to help you make smart investment decisions.