Making Your First Real Estate Investment? Here’s What You Should Know
Perhaps you’ve been interested in investing in real estate for some time, and you’ve finally found the right investment property at the right price. Entering the world of real estate investing can be exciting, and it’s also one of the most stable forms of investing. That said, it’s smart to go into a real estate investment purchase armed with as much information as possible. Below, learn some guidelines on what to know before you make your first investment in real estate, and contact a seasoned New York real estate attorney with any additional questions you may have.
- Learn everything you can about the property. Learning all you can about a property before making a purchase is critical. Subject the property to a thorough inspection. Find out whether any important components will soon need to be replaced, and if the seller isn’t willing to make these repairs, factor these expenses into your calculations of whether the property makes a worthwhile investment.
- Calculate how much you’ll need to spend before the property will bring in income. Not every property will be instantly profitable, especially if you intend to convert the property to a new use after you purchase it. Before agreeing to a sale, make sure you understand what you’ll need to spend on renovations, conversion costs, or obtaining zoning variances so that you can be sure that the property is right for your purposes.
- Similarly, make sure you are comparing apples-to-apples when looking at different potential target properties by using the appropriate metrics. One often used, although not dispositive, metric experienced investors use (in connection with other metrics such as in cash-on-cash return, gross rent multiplier, etc.) is the Capitalization Rate (or “Cap Rate”) which measures an investment property’s rate of return before taking debt service into consideration. Cap Rate is calculated by dividing the annual net operating income of the property by the purchase price and provides a useful took in comparing the potential annual yield on one investment property with that of another.
- Study local trends in the real estate market. You already know that the trends in property purchase costs can affect the value of your investment, but go beyond recent sale prices when looking at whether the neighborhood is one worth investing in. Factors like local crime rates, large development projects, or incoming businesses can all have an effect on what you can expect your property to be worth in the future.
- Find an experienced real estate attorney to represent you in the sale. As a newcomer to real estate investing, you want to be sure that you’re going into a transaction armed with as much information as possible. By finding seasoned legal representation, you’ll have someone on your side who not only understands the local market, but also can ensure that your interests are fully protected when you enter into a contract to purchase a Hudson Valley investment property.
If you’re in need of dedicated, professional, and seasoned legal help with a New York real estate purchase or sale, contact the Hudson Valley real estate lawyers at Van DeWater & Van DeWater in Poughkeepsie at 845-243-5214.