Neil Shekhter – NMS Properties – Purchasing Your First Rental – Things to Consider
LOS ANGELES, CA / ACCESSWIRE / June 20, 2018 / According to Neil Shekhter, purchasing a property is not easy, especially when it’s your first time. Some opt to hire firms when buying homes, which can be once or twice in their lifetime. If it is a home you are buying, it may not matter a lot if you buy it a little higher or did not research enough because this is a place you may end up staying for at least 20 years. However, the story changes when it comes to rentals. Any mistake may compromise the returns meaning that you may have to dig into your savings. Before buying the rental property, consider the following things.
Location means a lot. It also determines the type of tenants you will attract. For instance, if you are targeting a one-bedroom rental, it will be easier to attract interested tenants half a mile from a campus than in an area that is more of a family set up. Families may require a bigger house.
To get the right location, put yourself in the shoes of the tenants. Would you like to live in a place with limited parking space or many noisy clubs? Definitely no. If you are targeting families, consider areas near schools and other amenities. For a one bedroom, being near a supermarket or grocery stores is essential.
Neil Shekhter stated that before settling on any property, you need to identify your target tenants. If you are thinking of attracting families, you probably require rentals that have several bedrooms and spacious living rooms. If you want to attract young people who are just starting their careers, think of the roommate setup. Though the house can have a smaller living room, there should be enough bathrooms which should be accessed from the individual bedrooms.
You need to have at least 25% of the asking price before buying the rental. Banks can lend you the money, but they have their terms and conditions, one of them being that the expected income from the rent should be more than 125% of the mortgage payments. When borrowing money from banks, always remember that the rentals may take even up to a year to get tenants. Your bank will want their money regardless. If you had borrowed all the purchase money from the bank, you might end up selling the property for at least $20000 less than the market price. More to this, your credit score will be tainted and your investment dreams ruined. Think through the investment before venturing.
A buy to let property or mortgage attracts higher fees and taxes than residential mortgages. It’s important to understand the amount you are supposed to pay for taxes and fees before the purchase to ascertain it’s a viable investment.
Note that taxes will not only be on the purchase of the property but also on the income. Earning more money may also steer you on a higher tax bracket, which you should consider by doing the calculations beforehand. Because of the complexities surrounding legal, financial issues, consult a lawyer before making the decision. You may think this is an additional expense, but it can save you a lot of money in the long run.
Is the property ready to let or does it require some repair work? If so, how long will it take and what will it cost. Note that this is an added expenditure, which you should factor in before making the purchase. In addition to this, the rentals will not be bringing in any income for as long as you are doing the repairs. If it is minor works such as carpet cleaning or painting, you can offer the tenants the first month free as they do it themselves. I let my tenants fix things around their house to suit their needs and preferences then I compensate them, explains Neil Shekhter, chief executive officer of NMS Properties.
If the repair work is more intensive, can you handle it yourself or will you have to hire an expert? Before hiring a contractor, it’s essential to have a contract which you both sign. This will cover you from surprises and slowdowns. When you have the drafted budget for the repair and renovations, add at least 15% to cover for unexpected expenses.
You may not know how well the property will do in the market until you own it. Once you have purchased it, check how much other related properties are going for in the same neighborhood or play around with an online advertisement. Keep on fixing the price upwards or downwards until you get a price that people seem to be comfortable with but do not hurt your investment.
You can also list it in a local agency and watch for how long it will be listed. Never take what the realtors tell you to be factual because some may say to you that the property can go for as much as $1M more than the current market value. If you list the property and it goes, at least you got tenants although you may never really know the exact listed price. All you know is that tenants were comfortable with the amount.
NMS has offered quality rentals in the Los Angeles area for nearly three decades. Since 1988, NMS has developed and managed a large portfolio of premier apartment buildings and commercial properties in Santa Monica, West Los Angeles, Brentwood and the
San Fernando Valley
Contact:
https://www.linkedin.com/in/neilshekhter/
https://www.crunchbase.com/person/neil-shekhter
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SOURCE: NMS Properties, Inc.
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