What Type of Property Is Best for Your First Real Estate Investment?

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Real estate is a popular investment strategy because it’s so diverse. From condos to single-family homes, and long-term rentals to nightly vacation stays, there are many different opportunities to earn passive income. 

When looking in the MLS at property listings, It’s easy to feel overwhelmed because there’s a lot to sort through for a beginner in this space. Ready for the good news? The first step is the most daunting. 

While buying up real estate does require you to be a little financially savvy, the hardest part is saving up for that down payment.

Once you have enough for about 20% down, it’s time to start searching for your first property! Here’s everything you should consider as you take this first step toward investing in real estate.

First Real Estate Investment

Deciding Between Long-Term and Short-Term Rental Strategies

One thing to think about before you buy is your rental strategy. Long-term and short-term rentals differ greatly, so it’s important to consider your goals before you buy a property. 

Long-term rentals are usually provided to tenants in a lease agreement that lasts for a minimum of six months. These rentals offer steady and reliable income with the bonus of appreciation over the course of many years. 

The main risk here is retaining tenants. Depending on the type of property you buy, tenant turnover can be a hassle.

If you do choose to go this route, you may want to consider hiring a property management company. This can relieve the stress of finding tenants, along with a variety of other landlord tasks, such as maintenance requests.

Alternatively, short-term rentals have become an increasingly popular strategy over the last decade. These are vacation rentals that are available on a nightly basis for shorter periods of time.

Whether you rent out your own home or buy a property solely for the purpose of creating a short-term rental, a good location can result in desirable profits.

Many investors use companies like Airbnb and VRBO to advertise their homes and maintain occupancy.

Fixer-Upper vs. Turnkey 

Before you begin your search, you’ll also need to think about whether you’re up for the challenge of a fixer-upper. These types of homes can vary greatly when it comes to how much rehab they need. 

On one end of the spectrum, you may have a property that is outdated, but the bones are good. A kitchen refresh or a simple bathroom remodel will do the trick. For those who enjoy these types of projects (or have the money to hire a contractor), it can be relatively easy. 

On the other hand, a distressed property may come as a great deal in a competitive market, but the renovation process will be highly involved.

Many people go this route and then refinance to find a loan that includes the repairs in addition to the initial purchase price.  

Budgeting for home renovations becomes a key consideration.

For some investors, the fixer-upper is just too daunting. This is when a turnkey rental property will be your best bet.

Whether it’s a condo or a single-family home, “turnkey” refers to properties that are essentially immaculate and ready for immediate use. This is ideal for a beginner investor who doesn’t have the time, experience, or money to take on big renovation projects.

Types of Homes to Consider for Your First Investment

Now that we’ve discussed the various strategies associated with real estate investments, it’s time to find a property. Here are the main types of homes you’ll find on the market, with information on the pros and cons of each.

Single-Family Homes

This is probably the most common route for beginner investors because it’s usually a safe bet. Single-family homes are relatively affordable and easy to manage on a day-to-day basis. 

Because they’re in demand, especially in family-oriented suburbs, the opportunity to attract high-quality tenants is promising. In fact, find a single-family home in a great school district, and you can probably guarantee you won’t deal with frequent tenant turnover.

So, what are the cons? The main thing to consider here is that your ROI probably won’t be seen through monthly rental income. It will come a few years down the line when you sell the house.

Multi-Family Homes

When a residential property has at least two separate units, it’s classified as multi-family housing. 

The benefit of this type of investment is higher monthly rental income. That said, qualifying for the right financing can be complicated. This makes it a less common option for a beginner investor. 

If you are thinking of going this route, consider starting with a duplex (housing with just two units) and see if it’s the right fit for your investment goals.

Townhouses

A townhouse is a multi-floor home that is common in both suburbs and urban areas. They share one or two walls with neighboring units, while still offering more privacy than a condo. 

They are usually smaller than a single-family home, but they still offer the feeling of a traditional house. In fact, most have two stories, and many have three or more. In most cases, a Homeowners Association (HOA) oversees the surrounding landscaping and any other shared spaces.

Condos

Unlike a townhouse, a condo may be above or below another unit, making it more like an apartment. The difference is that condos are owned by individuals instead of one large management company. 

These are typically small and low maintenance because the HOA will handle shared spaces (much like a townhouse). Condos usually include amenities like gyms or swimming pools, which are nice to have, but can lead to higher monthly HOA fees.

Closing the Deal

Real estate is a promising investment, regardless of the type of property you choose for your first venture. In addition to generating rental income, you may reap the benefit of profitable appreciation and various tax benefits. It’s a diverse type of investing with many different facets.

Take time to research the housing market trends in your area and dive into your financing options. Stick with a deal that you understand before you start to think outside the box. A straightforward and safe investment is usually the best route to take when you’re just getting started.

5 Things to Do When You First Move Into a New House

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Finally moving into a new house is the last leg of a marathon that for many homeowners involves months (if not years) of preparation.

Saving a down payment, finding a home, negotiating an offer, securing a mortgage, and getting through the inspection and closing are just a few steps in the process.

Getting settled in a new place should be easy, comparatively speaking, right?  

Moving into a new space involves more than merely unpacking your boxes. As a homeowner, you’ll need to get familiar with the inner workings of your house and how its main systems function.

You may have some immediate repairs or changes to make or services and utilities to set up. And don’t forget to get to know your neighbors.

Whether you’re moving into your first home, or you’re a seasoned homeowner who’s selling to downsize or up-size, take advantage of this time to get set up for success with a move-in checklist. 

Things to Do Before Moving Into New House

Do a Walk Through

Ideally, a complete walk through will be completed just before the closing so that any discrepancies or concerns can be addressed before the sale is finalized.

Check to make sure the terms of the sale are in order such as: 

  • Repairs that may have surfaced during the inspection that the seller agreed to make.
  • Appliances or other items (like a chandelier, for example) that were part of the sale are in the house. Likewise, items to be removed (like a pool table) are gone.
  • Outlets, lighting and plumbing fixtures, doors, and windows are in working order. Check outdoor spaces like a garage or shed as well. 
  • The house is reasonably clean and free of mold or pests.

Consult your realtor if you encounter an issue that violates the terms of the sale to determine a course of action with the appropriate parties, whether that’s the seller’s agent or the seller themselves if the sale was a For-Sale-By-Owner (FSBO) deal.

Walking through an empty house is also a great time to grab a notebook and a tape measure.

Go room by room, and make note of possible furniture layouts as well as any projects or repairs that need to be addressed. 

Safety first

You and your family’s health and safety comes before anything else. Do an initial child and pet-proofing of your new home to ensure everyone’s safety during the moving-in/unpacking process.

Take standard safety precautions and cover outlets, sharp edges, and corners. Install gates in restricted areas and tamper-proof locks on lower kitchen and bathroom cabinets as well as knob protectors on the stove.

Check that all windows close securely and remove any long or hanging cords from blinds.

In addition, ‘move-in specific’ precautions include: 

  • Keep sharp tools like scissors or box-cutters up high and out-of-reach.
  • Spread boxes out instead of stacking them to prevent a toppling hazard.
  • Store breakables, sharp objects, alcohol, or cleaning supplies out of reach or in a locked lower cabinet until you decide where they’ll be permanently housed.

Test fire and carbon monoxide detectors and replace the batteries if needed. It’s a good time to store a fire extinguisher on each level of the house and to create a basic evacuation plan with a designated meeting spot in case of emergency.

Consider changing the locks as an extra layer of security as it’s hard to be certain who, besides the previous owners, may have had a key to your new home.

Temporarily store an extra key under the doormat, under a flower pot, or in a garden hose; moving in entails a lot of going in and out of the house and it’s easy to accidentally get locked out. 

Test utilities, connectivity and locate key features

Ideally, the accounts for your utilities, Wi-Fi, cable, or phone were transferred, or new ones set up and activated at your new home before moving day.

Make sure you have running water, electricity, and gas — contact the service providers right away with any issues.

Check with your township to ensure waste pick-up has been arranged. Regardless of the season, test both the heating and cooling systems to make sure they’re in working order. 

If anyone in your household will be working or schooling from home, it’s a good time to connect your devices to be certain Wi-Fi is up and running. 

Locate the key systems in the house: the fuse box, circuit breaker, main water valve, gas lines, sump pump, and the water heater or boiler — and know how to turn them on/off or reset them.

Make sure major appliances are plugged in and working properly such as: your refrigerator, freezer, washer/dryer, oven/stove, dishwasher, and automatic garage door. Be sure to check out fixtures like ceiling fans and gas fireplaces as well.

Deep Clean

It’s never easier to deep clean your home than when it’s completely empty, so dig in, if possible, after the closing and before the movers arrive. 

Clean from high to low in each room, getting the tops of shelves, ceiling fans, woodwork and trim, or other tall spaces that don’t usually get attention. 

Kitchen Give the refrigerator priority since you’ll be stocking it with perishables, then clean the cabinets, sink, light fixtures, and microwave. Be sure to run a sanitizing cycle in the dishwasher. 

Bathroom After an initial scrub down, sanitize all surfaces including the light switches, faucets, and toilet paper holders. Replacing toilet seats is an easy and relatively inexpensive way to ensure they’re completely sanitary. 

Floors Clean the floors last. For tile, hardwood, or linoleum, use a vacuum with an appropriate floor to get up any debris and mop accordingly. For carpets, a rented steam cleaner (if you don’t have one) will remove allergens, stains, and other debris if you’re not replacing the carpets altogether. 

After moving in you can tackle the exterior. Consider doing a pressure washing of the exterior including any decks or patios.

Meet Your Neighbors

No doubt you’ll want to explore your neighborhood, and that includes meeting your neighbors.

Start by introducing yourself to the homeowners on either side of you, perhaps ask for recommendations for good restaurants and grocery stores, or ask a question about garbage pick up to make conversation. 

Many neighborhoods have digital options or use social platforms for getting involved with the community.

Consider attending a town meeting, volunteering for a service project, or joining the planning committee for the neighborhood block party. The more you immerse yourself in your new surroundings, the more likely your new house will quickly become a home. 

10 Things to Look for in a New Neighborhood

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From floor plans to square footage, home buyers spend a lot of time trying to find the perfect house. However, it’s also important to know what you’re looking for in a neighborhood.

The community you choose will have an impact on everything from your daily activities to your property taxes.

There’s a lot to consider as you start your search, which is why it’s helpful to have a checklist before you start looking on one of the popular home search websites.

Here are 10 things to look for in a new neighborhood. 

Picking a Neighborhood

Good Schools

Regardless of whether you have kids, your local school district is incredibly important because it can have a big impact on your home’s value, so it’s important to do a little research. Most school districts are assigned a letter grade indicating their performance level. 

If you do have children, you should also take time to ask people in the community how they feel about the specific schools your kids would attend. You may also want to consider the availability of bus routes and walkability to those schools if that’s important to your family.

Demographic Details

People buy homes at different stages of life. Perhaps you’re expecting your first child and want to live in a tight-knit neighborhood with plenty of young families. On the other hand, if you’re a new retiree, you probably prefer a quieter neighborhood with more opportunities for recreation and social gatherings. 

Whatever phase of life you’re in, consider a neighborhood that fits your demographic desires. Your Realtor can provide this type of data to help you find an area that fits your lifestyle. 

Safety 

It’s essential to feel safe in your own home. Research crime rates in a potential neighborhood before you submit an offer on a house. 

If it appears there may be problems, talk with local police about the area in question. You may find that the ZIP code has a few streets prone to crime, but the neighborhood is safe overall. 

A little research will go a long way when it comes to determining the safety of a neighborhood.

Walkability

It’s easy to overlook, but walkability says a lot about a community. You’ll likely want sidewalks that facilitate easy walking, running, and biking. The last thing you want to worry about is a car zooming by.

Some people even prefer to have a high walkability score to local amenities, such as coffee shops, restaurants, and grocery stores. 

Low Noise

Visit a potential neighborhood on different days at various times to scope out the noise situation. Are trees lining the backyard hiding a major road with traffic noises that would keep you up all night? Are flights from the city airport right overhead? 

These noises won’t go away. Even if you’re willing to live with them, a future buyer may not feel the same way. If you’re trying to sell your house fast, this could deter interested buyers. Plus, it could have an effect on resale value.

Nearby Amenities

Think about the amenities you access on a regular basis. Whether it’s a daily latte, the grocery store, or even the dry cleaner, make sure you have what you need nearby.

For those who now work from home, it may be important to find a nearby coworking space to escape to when your to-do list is long.

Families with kids may also want to find a neighborhood with parks and community pools.

If you have frequent medical needs, a hospital and other health care facilities would also be an important aspect to consider. It’s important to think about these amenities and their proximity to a new home. 

Manicured Homes

You may feel proud to have the nicest house on the block, but you don’t want to be the shining star among a string of dilapidated homes.

Your home’s value is affected by the surrounding neighborhood, which is why it should look clean and well-kept.

Communities with a homeowners association usually have specific rules for ensuring that every house has curb appeal. That said, living in a community run by an HOA means you’ll have monthly fees. Look closely at the dues you’ll owe and any noteworthy restrictions. 

Those who plan on downsizing often do so into a more manageable neighborhood with a homeowners association.

An Easy Commute

Adding time to your commute is as bad as a pay cut when it comes to job satisfaction, according to researchers. 

If you intend to stay at your current job after you move, it’s important to calculate your round-trip commute. In fact, you should test out the drive at the same time you’d be on the road getting to and from work. 

This will help you assess the traffic, brainstorm alternative routes, and make a final decision before you decide on a neighborhood. 

Public Transportation

If you depend on it, public transportation is important to research before you choose a neighborhood. Whether you’re traveling by bus or train, make sure you have the stops you need close to the house. People who travel for work on a routine basis should also consider the distance to the nearest airport. 

As the use of rideshare services continues to rise, there are more options, but wait times can be extended in some neighborhoods. If you frequently use Uber, Lyft, or other services, open the app when you’re in the neighborhood and check wait times and prices for rides to your usual spots.

Affordable Property Taxes

It’s easy to fixate on the price of a house, but don’t neglect research on local property taxes. This is easily overlooked, especially when they’re rolled into closing costs

The county where you buy a home will impact how much you pay every year. If the value of homes in your neighborhood are expected to rise, your property taxes will likely be higher each year. Are you able to make the necessary payments in the event of an increase?

Taxes are one of those hidden costs in home buying that can really make a difference.

Although your property taxes can be much different than your neighbor’s, you will likely see certain trends. Find a local real estate agent who can help you estimate the costs before making a decision. If you’re concerned about saving money during your transaction, consider lowering commission costs by choosing a discount Realtor.