The economy has certainly been volatile for the last few
years. The stock market took a major nosedive,
foreclosures have been rampant, and unemployment has
risen to all time highs in many areas. However, in every
market, there are opportunities and for some, now is a
good time to buy investment property due to the decline in
housing prices. Unfortunately, it can be easy to forget to
watch for investment pitfalls even though it is a buyer's
market. If you are thinking of purchasing more rental
property, avoid making the following mistakes.
Purchasing a property without educated research is a
major misstep. Consult the professionals - a
knowledgeable real estate agent, your property manager,
a reliable mortgage banker, and any other party that can
give you realistic values. However, you need to do your
own research so you can ask intelligent questions and to
know when you are receiving bad information. Consulting
a real estate agent who does not know the rental market is
a disaster waiting to happen. It is easy to project a positive
return on paper when using inflated figures. Ask us, your
property management company, to investigate rents and
expenses before you purchase the property.
Continuing to wait for the market to bottom can mean
missed opportunities. You can make intelligent
investments in any market. Unless you have a crystal ball,
there is rarely a way to know when the market is going to
rebound. Even when market prices start moving up, you
can still purchase a good investment - you just need to
research any potential investment.
Not planning on holding a rental property as a longterm investment is not realistic. It is possible to buy a
property and flip it in a short amount of time, but it often
takes holding the property at least ten years or longer to
realize the full benefits. One reason to think long-term is
the yearly tax benefits you have while owning the property.
Remember, that unless you reinvest profits from a shortterm rental, there may be heavy tax consequences.
Investing with the wrong financing can easily turn an
investment into a nightmare. Beware of balloon payments
or illegal financing. Consult a mortgage professional who
has experience with investment financing and can counsel
you on the different programs available.
Expecting minimal or no maintenance while owning an
investment property is a sure path to a poor experience.
Consider how much maintenance goes into your own
residence and you will realize that rental property goes
through the same wear. You may have the best tenant on
the planet but unless you maintain the property, your
investment will suffer. Remember this is normally a longterm project and many items such as roofs, fences, paint,
and carpet have their own projected life. When planning an
investment budget, consider how you will cover
maintenance and necessary replacements.
Working without good insurance, reserves, or a
financing plan for possible vacancies, maintenance,
emergencies, or disasters is like walking a high wire
without a net. There are landlord policies available that will
assist with vandalism or an emergency/disaster. Talk with
an insurance agent who knows what landlord policies will
help you in times of distress. In addition, savings for
unknown factors, such as a long vacancy or major repair,
and contacting financial institutions in advance about
emergency funding are important measures to take.
Not treating investment property as a business is the
biggest mistake of all. It is a business and using a realistic
approach rather than an emotional one is a must. Like all
businesses, there are ups and downs - accepting this does
make a difference.
As your property management company, we are here to
help you with any questions you may have on potential
rental property. The real estate market has proven itself
time and time again. In any housing market, there are
opportunities for investors.
Messages from TERRA Residential
Houston Real Estate Market Many of you have been
inquiring about the Houston real estate market. We're
doing fine. We were never hit as hard as other areas of
the country in the recent downturn. Many of our properties
haven't lost any significant value at all and the rents have
stayed steady. Houston historically has run counter to the
rest of the country, when times are good on the coasts, not
so good here, when it's bad on the coasts, it's good here.
Now that the market is expected to start improving this
year, many are worried that since we did not lose value
when everyone else did that we would now. That is not
expected. Our rental market has been very strong. We
have a lower vacancy rate than normal without lowering
the rents. Most new leases are higher than the previous
tenant's rent. Although there are still a number of
foreclosures on the market (mostly ARM mortgages that
adjusted), the sales market is picking up slightly.
For those of you wondering -- we are still not
recommending our clients to sell unless they really need
to. There is still too much inventory on the market, making
days on the market for sales long (higher holding
expenses), or forcing discounts to move the home
quicker.
The flip side of that is that it is a great time to buy. There
are lots of available homes, the builders are making deals
to move more homes and the 2-5 year old market is very
good for buyers. The hardest part is finding the mortgage.
So if you want to expand your investment portfolio, the
time is now. Just contact Jamie Dominy in our office by
any of the means on the left and we'll find you a good buy.
Online Portal and Paperless Statements
Most of our clients have set up their online account and
are now receiving their statements and other electronic
documents through our secure online OWNER PORTAL
through our website at terraresidential.com.
For those of you already signed up, let us know how it's
going. If there is anything we can do to make it better,
please let us know. For the rest of you, please sign up.
You'll have more timely information, and you can download
your statement much sooner than receiving it in the mail.
And it's green. Just send us an email and we'll help you
get set up.
