As a landlord or homeowner there are many simple ways to improve your property to increase value and secure your investment. In today’s current economic environment with the state of the housing market in recession, more and more people need rental apartments as it becomes more difficult to achieve home ownership.
Five years ago it was far easier for the average American to get approved for a mortgage to purchase a home. Lending standards were easy and interest rates were low. The health of our economy was also strong, with a fraction of the unemployment rates we experience today. Developers couldn’t build enough supply to keep up with demand, and prices continued to rise.
Today we are faced with an abundant amount of supply and shrinking demand. There are still hundreds of residential developments nationwide that are trying to break ground or have been left unfinished. The easy money supply has all but dried up, and many lenders are stuck with failed developments, or are working through thousands of defaulted loans. This is a problem that developed mostly in the United States, but has spread through the financial system to the rest of the world. Because housing prices continued to rise for years there was so much optimism in the American real estate industry that investors from around the world wanted a piece of it. Mortgage loans were sold and packaged in traunches as “mortgage-backed securities” to investors on Wall Street and around the globe.
People still need a place to live. With market correction comes great opportunity – falling prices are making it possible to have better cash flow from your investment property. Unemployment rates are at their highest rates since 1992 and less people can afford the down payment and monthly mortgage costs to make the possibility of home ownership realistic. Many predict that this will adversely affect the rental market in regions nationwide, as less money circulating through the economy can only mean that rents will fall as well. But if you own a property in a good location, close to public transportation and in a good school district, you are betting on solid fundamentals that can sustain serious market corrections in pricing. You can always make an argument for the value of a good location, and there is always stronger demand for this product.
Most people like to live with some outdoor space on the property as well. Well-maintained backyards and front yards are always a plus especially in the warmer months. Nice views from the interior are always attractive to perspective renters and purchasers. If you own condos in an apartment building, making sure you have a friendly door staff and accommodating maintenance professionals is also helpful to attracting potential tenants.
One of the most important factors is making sure you have gotten a good price on your acquisition. Make sure you have all pertinent information possible, to ensure that you are not missing anything that can come back to cause problems down the line – i.e. lot line disputes, tax liens and costly maintenance issues. The more due diligence you can do prior to closing, the less surprises you will be faced with after closing. Know what comparable sales have taken place in the neighborhood, and what market rental income is for your property type. If you own a condominium, make sure your association is on top of all management of the property, to ensure a well functioning habitat. Again, the more work you put in the better likelihood of securing a profitable investment, and thus improving your overall bottom-line, which is what real estate investment is all about.
You make your money on the buy side. If you can get a good deal on the purchase price, you have more room to maneuver when you sell it. You can price the property more aggressively if you have more equity to work with. Today there is a good amount of opportunity to buy well below market price and if you can hold the property for 4-5 years, and can sustain good rental income, you will be in a position to net a strong return on your initial investment.