In buying any kind of real estate property, location and price are the most important considerations. When it comes to Scottsdale investment properties, it's no different. If you're looking at a Scottsdale property for sale, you'll want to carefully analyze the neighborhood and its surroundings. There is an art to investing in real estate that comes through years of trial and error but, as with everything, you need to invest time and effort into your research before making a decision on anything if you really want to succeed.
The best place to start when evaluating a potential Scottsdale investment property is by doing your homework on the neighborhood. Ask yourself what type of people live there? Is it mostly retired seniors or young families? Are there a lot of children? What is the general opinion on this neighborhood? Is it affluent, safe, and reputed to be so, or is it filled with crime and violence?
Many people first get interested in Scottsdale real estate because they've heard that it's a great place to raise a family with lots of outdoor activities for you entire family. Another reason why many individuals buy property in Scottsdale is due to its proximity to Phoenix. If you've been curious about joining the world of real estate investment, read on to learn more!
What are Investment Properties?
The most common question that many people have when it comes to the real estate market in any area is this: "What are investment properties and how can I jump into the investment game?"
An investment property can be defined as a residential property that is bought primarily for profit purposes and also serves as a place to live. Typically, this type of house can provide rental income which will cover your mortgage payment, taxes, and any other associated fees.
People who buy these types of properties usually expect a return on their investment (ROI). The total amount that is paid for the house is known as "the acquisition cost." This will include all closing costs as well as renovations or repairs performed by the owner. After this bill has been covered, there should be some cash flow leftover - this cash flow represents net operating income.
There are two groups of people when searching for investment properties; there are the landlords who have already bought their own home and then there are those that are not living on the property which they have invested in. The first group, the people who live in the same house where they rent out a part of it, is known as being "a benefactor owner." The second group is known as being a "professional investor." This type of investor typically owns and manages more than one property.
I Want to Jump In! Where Do I Start?
One of the very first things you're going to need when you begin your search for that ideal investment property is to hire an expert who can guide you through this process: a real estate agent. Check if that realtor specializes in investment properties in Scottsdale, as it will allow you to see what kinds of deals he or she has found for their clients in the past. Different types of houses and apartments may suit different needs, which is why a top-notch realtor will be able to help you find exactly what you're looking for.
After you've acquired a real estate agent, find a good mortgage broker to help you out with the financing. The interest rates in Scottsdale, Arizona, are quite low, so this might be an excellent time for you to do that.
Is There Any Maximum Limit on Property Investment?
A lot of people put their entire life savings into various investment properties and forget about it. This is not advisable at all if you don't know exactly what you are doing. You should always keep enough cash back in case something goes wrong as unexpected expenses can arise during any home improvement project. It's also a very bad idea to take out a second mortgage or use your home equity line of credit for buying new real estate property because these will have higher interest rates than traditional loans would have.
In general, you should never invest more than 50% of your net worth into investment real estate.
What Types of Properties Are Available?
Once you've hired a realtor and you've figured out what you can afford, it's time to start searching for that perfect investment opportunity!
There are a wide variety of investment properties available in Scottsdale. You can buy small condos, high-rise buildings, and single-family homes to name a few. The most popular type of real estate that investors are looking for are multi-family homes. This includes duplexes, triplexes, and townhomes. It's a good idea to go with these types of properties because they can provide the best cash flow compared to other options.
Duplex - A duplex is a two-unit property, which means you will have to deal with your tenants directly. Although it might seem intimidating at first, as an investor you'll learn how to do this quite easily.
Triplex - A triplex is simply a three-unit property. You will now have a total of six tenants to deal with, but this could also mean even more cash flow for you! Because of the larger number of units, however, your acquisition costs are going to be higher than they would be for a two-unit building.
Duplex/Triplex Combinations - These types of properties will offer four living units for you to choose from. This means that in the unfortunate event that one of your rental units is vacant, you can sublease it to someone else if you're short on cash flow at the time.
Townhouse - A townhouse consists of more than two levels and there are no other buildings attached to it. You'll own every single unit as well, which means you'll have complete control over each part of this property.
Finding the Right Neighborhood to Prop Up Your Investment Property
For many people, the most important thing when they buy a vacation or retirement property is location, location, location! That's true for investment properties as well; finding a good neighborhood will increase your chances at having success with this sort of purchase.
Some things you should look for when choosing your neighborhood are:
- A high occupancy rate - This means that there is already a lot of competition in the area. This shouldn't be seen as a bad thing because it will also mean that there are many tenants looking to rent out houses within the vicinity or in surrounding neighborhoods. Serious cash flow can turn into real wealth if you do this right and stick with it for some time, so finding this kind of market is an excellent idea!
- A high appreciation potential - What does this mean? Well, you'll want to find areas where people who own their homes are investing in improvements that will increase the value of their property. When they decide to sell off their property, you're going to have a direct increase in property equity.
- Low crime rates - Again, this shouldn't be seen as an issue because a lot of people actually like living in areas where the streets are kept safe and where they don't have to worry about someone breaking into or vandalizing their home while they're gone.
Take Care of Your Due Diligence
Due diligence is all the stuff that happens between picking out your investment property and signing the final document. You'll want to get your property inspected from a licensed contractor and get it appraised by an expert in the field. A plumber or electrician will also tell you about any issues with the house, its systems, and appliances that you might have overlooked. You can avoid costly repairs if you do this!
You'll also need to decide if you want to hire a property manager. This person will take care of all the tenants for you so you can have some peace of mind while focusing on other aspects of your life. It's a good idea to hire one right from the get-go if this is your first investment property, but it's not mandatory.
Once you've done all of these things, it's time for the fun part: negotiating for a deal! Don't be afraid to negotiate hard as soon as somebody else has expressed interest in your house or apartment before you buy it; there is absolutely nothing wrong with asking for more than what they are offering. Once you're ready to go ahead and sign on the dotted line, make sure that everything written into that contract is something that you're actually willing to follow through with. A real estate agent would love to close on a property as quickly as possible and not care at all if the buyer's ready, so make sure that you know what you're getting into before just signing it away!
Tips and Tricks for First-Time Investors
Buying commercial real estate is a much different experience than buying residential. Here are some tips for first time investors or those who simply want more information about how this market works.
The main thing to keep in mind is that your business will need to have a steady flow of customers coming in order for you to get any sort of return on investment, so make sure that you sign up for a local marketing campaign as well!
Make good decisions when analyzing financial information, and don't be too worried about the numbers. Investing is all about planning for future value, not getting rich off of one deal. This type of investment should be seen as a long-term plan to build wealth!
Get educated on what you need to look out for when buying real estate from a licensed broker or agent. Remember that these are the people who will help you analyze the available properties in Scottsdale so you can find yours! When choosing an agent, always go with somebody who has a good reputation in the community, and make sure that they actually have experience in this field; it wouldn't hurt to ask around town and see if anybody knows anything about them!
You'll want to buy commercial real estate during boom times. These are the times when Scottsdale is the most attractive for investors, so selling at a premium will be much easier!
Make sure that you read all of the fine print before signing on any dotted lines. Sometimes your broker or agent won't tell you about caveats in contracts because they want to close the deal as soon as possible. Don't let yourself get tricked into something that isn't going to benefit you; have an attorney review any contract for you if you are especially confused or concerned about what you might be getting into.
Always keep good financial records of everything related to this kind of investment and make sure that somebody trustworthy knows where these financial records can be found should anything happen to you! People who take this seriously tend not to have any issues in the future since they are prepared, so keep your information organized!
Making the decision to purchase any form of real estate, whether that be a traditional home for you and your family or an investment property to create a passive income, is a big deal! Investment properties can be an excellent way to not only earn some extra income, but also secure your own financial future. It can be an intimidating process for first-time investors, but the payoff can be incredible! With the proper team to back you up and guide you through your purchase, the daunting task of finding the right investment opportunity can become a smooth, and even enjoyable, experience! You may just find that one property is not enough and branch out into further investment endeavours!