When it comes to investing in real estate, there are quite a few options. So, let’s break it down and see what might work best for those thinking about putting their money into the market.
Family Home
When looking to buy a family home, you want it to be a place that you can enjoy for many years, whether by yourself or while raising a family. But, you also want to make sure it’s a good investment for the future.
For the most optimal return, what factors should be taken into account? “Definitely location, the neighborhood, and the school system, as well as the potential to maybe expand, because what might be big enough for you may not be big enough for someone else who wants to buy it down the road,” says Alicia.
Vacation/Second Home
This could be a place to enjoy with your family during the year, and also a property that you may want to rent out when not using it. So, what should you focus on for this type of investment?
Here are some questions that Alicia says are important to ask. How close is the house to the beach or other desired location? What amenities does it have? Does it have a pool? All of these things make the home more desirable to renters.
Also, find out how quickly the values are rising in that area. “If they're going up, then you know you can quickly gain value equity,” she says. “If they're not, you have to really run your numbers.”
For example, what is the purchase price, and if you’re taking out a loan, what is the cost per month? How much is homeowner’s insurance?
“You also want to factor in taxes, association fees if the home has an HOA (homeowner’s association), and flood insurance if you need it,” says Alicia.
What about a cleaning service? Especially if the property isn’t close by, you’re going to need someone to go in and change the sheets, put out fresh towels and make sure it's clean for the next guest, she advises. If it’s a house with a pool, who is going to maintain it, and what about landscaping? Just like with a primary home, there are many expenses involved.
You might be getting a certain amount in rent, but then what happens when a huge ticket item is needed? Did you budget for that, or is all the money that you just made being used to replace the roof? Is that a good investment?
“Factor in what your payment is going to be and then what your return is,” she says. “People often think, ‘Oh wow, I can get this much in rent,’ but they don't take into account all those other things that add up.” If your payment is more than the rent, you have to make sure you’re okay with covering the other expenses.
The good news is that any rental income brought in offsets the cost of owning that vacation home and provides you with equity and nice returns when you decide to sell one day. At the same time, you get to enjoy having a place to make happy memories with your loved ones.
Rental Property
This is a property that you have no plans to live in; you just want to use it as an investment. “It's all about the income,” says Alicia. “Location isn’t as important. Instead, how much can you buy it for? How much are the taxes and how much rental income can you get?”
If you’re bringing in less than what you’re putting out, then that’s not a good investment. It’s also important to have someone on hand to do any maintenance needed, she says.
If the numbers work, then having this type of property is a great addition to your financial portfolio. It will provide a nice monthly income or pay off a mortgage on the property. And once you sell, the equity is all yours.
Home Flips
This is one of the most complicated real estate investments. “You really should be a professional and really know what you're doing,” says Alicia. “Your numbers are so important, so if you don't know anything about how much some things are going to cost, you're going into it blindly. You should have some kind of a partner or a mentor, somebody to ask about these things. It’s usually a lot more money and work than you thought it was going to be.”
These types of properties can often be found through sheriff's sales. “Sometimes you can also get on some lists where you’ll get a call for off-market properties,” she says. “These properties are the best because not a lot of people know about them.”
Alicia has connections on off-market properties, and also access to contractors who can help with all types of projects. “Most realtors have a person for everything,” she says. “I know an electrician, I know a painter. I'm very resourceful with having a team of go-to people.”
Regardless of the type of property you’re looking to invest in, Alicia can assist you every step of the way. “I’ve been a landlord for many years and have two rental properties myself,” she says. “I'm very experienced with marketing rentals, scanning tenants, and knowing all the laws and regulations to protect you as a landlord.”
She enjoys guiding people in real estate transactions, including those looking to buy multi-family homes. “I have helped clients buy and sell many multi-family properties,” she says.
Whether investing in a property that you’re going to live in, vacation in or just rent, Alicia can run the numbers with you. “I often work with people who are just starting out who know nothing about investment properties. I’m also going to help them spot a good deal.”
After all, when she first became involved in the real estate market, she had to learn too. Soon after having her second daughter, Alicia was ready to have a career of her own. “I had a friend who worked at ERA in Scotch Plains and she encouraged me to get my real estate license,” she says.
“At that time, I knew nothing about the process - I didn't even own a house, so it was a whole new world. Now, of course, I own a house, I have rental properties and I've flipped houses. I’ve come a long way.”
Getting into real estate, she feels, was a smart move. “I just love when I can deliver the news that an offer was accepted,” she says. “It's one of the biggest purchases or sales that somebody will ever make. It's a big deal and they're trusting me.”
She adds, “For a lot of people, where they live is life-changing. They can start hosting family functions and holidays and grow their families. A home is their happiness.”
#HoldenTheKeys
ERASuburb.com
Alicia Holden, from ERA Suburb Realty in Scotch Plains, is here to help us invest in real estate. Not only has she been a Realtor® for 11 years, but she’s also a landlord, real estate investor and a house flipper, so she knows every facet of the real estate market.
“I often work with people who are just starting out who know nothing about investment properties. I’m also going to help them spot a good deal.”
“For a lot of people, where they live is life-changing. They can start hosting family functions and holidays and grow their families. A home is their happiness.”
