It would be fair to say that jumping into the real estate world takes a great leap of faith for some people. At the same time, the proposition of eventually becoming your own boss and making a living through this is just too hard to resist. A passive income is the most desirable result for the modern-day person, after all.
When it comes to Houston, there’s no doubt that the market is as interesting as ever. It’s always going to be expensive, but at the same time this also means that it is lucrative. Al Hartman knows all about this, having been involved in the industry for many a year. We have therefore asked for his input on the subject, to find out some of the best tips for buying a first time rental in the Houston area.
For now, ignore the fixer-upper
We’ve all been there. Seeing a photo of a house in severe disrepair might be tempting, but for the purposes of your first rental purchase it’s advisable not to go down this route. Sure, the proposition of reaping in significant rewards due to the initial low price is nice, but at the same time there will be a lot of stress along the way. For the first time investment buyer, this is stress that you could really do without.
Instead, play things safe. If you look hard enough, you can find real estate which is priced below market value for a whole host of other reasons. It might be as the buyer needs a quick sale, in which case you can still obtain the low purchase price but without all of the building works that you don’t have experience with!
Furthermore, in Houston, contractor costs can be expensive and for the inexperienced investor this can be difficult to build into your margin.
Calculate the math from the beginning
There’s a difference between seeing something which “seems” a good deal, and finding something that actually is a good one.
This is where you really have to do the correct math from the beginning, and calculate how much your true yield is. It’s worth comparing this to the amount you can reap from other investments, such as the stock market. For example, while a good stock strategy should prompt returns of about 7.5%, as a landlord you should be aiming for about 6% in your first year.
It all comes down to location
It’s one of the oldest sayings in the real estate book, but get your location wrong and you are destined to fail. In Houston, this is particularly difficult. The good neighborhoods for schools don’t tend to be located centrally, meaning that good investments might actually be quite a way out of the center. It’s not just schools you need to consider though; think about all sorts of amenities including malls, restaurants and anything else that might attract people to live in an area.