Purchasing an investment property is one of the most important decisions you can make. Before purchasing an investment property, you should first seek sound advice. By doing this, you’ll be able to maximize the benefits received from your investment.
Charleston is a great property investment destination. The area has a growing job market, a low cost of living and a high quality of life. The Holy City is an investment goldmine.
Thinking about investing in Charleston, SC?
Here are 7 tips to get you started:
1. Do a rent survey.
By doing a rent survey, you can get a significant amount of information about what kind of neighborhoods are attracting tenants, which areas are renting the best, how long properties stay on the market, and where rents are heading.
Here are four steps to perform a rent survey for your Charleston investment property:
Step 1: Make a spreadsheet consisting of seven columns.
The columns are for:
- Rent per month
- Size of unit in square feet
- All bills paid
- Other comments
Step 2: Get rental data from comparable properties.
To achieve this, you could visit listed properties, ask a real estate friend for access to the Multiple Listing Services, visit rental sites like Craigslist.com, Apartments.com, and Rentometer.com.
Step 3: Use the data in the previous step to compile the data in the spreadsheet.
A minimum of six comparable properties is recommended.
Step 4: Interpret the results.
Make adjustments for utilities, amenities, and condition. Focus on the rent column.
Now, not only do you have a clear understanding of what rent to charge and where the market is, but you also have a pretty good idea of the changes you need to make your Charleston investment property competitive.
2. Conduct due diligence.
Before going ahead with a purchase, doing the due diligence of the potential property is critical.
When practicing due diligence, remember to:
- Have the home inspected. The last thing you would want is to discover expensive home repairs as soon as you are through with the purchase.
- Research the neighborhood. If you’re concerned about crime, inquire with the local police department and investigate using online resources such as FamilyWatchdog and NeighborhoodScout.
- Check out the ownership history of the property. A home’s history can say a lot about how it’s been treated.
- Work with your lender. You should be ready to discuss your lender’s willingness to underwrite a loan for the specific property.
3. Consider hiring a professional Charleston property management company.
If you aren’t particularly hands-on, consider hiring a competent Charleston property management company. Competent property management companies typically have a Rolodex of the best painters, handymen, electricians, and plumbers.
With the right management company, you are assured that even if the toilet clogs on the 4th of July, it’ll be taken care of. Besides taking good care of your property, property managers also collect rent, screen applicants, and advertise your property for you, among other things.
4. Figure out the cash flow.
Cash flow is king! Positive cash flow means that your Charleston investment property is profitable and is able to settle debts. Negative cash flow, on the other hand, means debts have overtaken profits. As an investor, you should make a point to track the inflow and outflow of cash.
There are many costs to consider when becoming a landlord in Charleston, SC. To name a few, there are association fees, maintenance fees, homeowners insurance, property taxes, and down payment and interest rate.
Hiring a competent property management company can really help in this regard. Even then, you should make it a point to track your investment property’s cash flow.
5. Hire a team of professionals.
There is a reason why successful property investors have a devoted team of professionals by their side.
As a start, have the following professionals:
- A trustworthy lender who can finance your investment
- A competent real estate attorney
- An honest property appraiser
- A competent local real estate agent
Besides these, you may also need other professionals such as electricians, plumbers, and painters.
6. Figure out your investment property’s financing.
Deciding to buy the investment property is easy; financing the property, however, is another story. Financing a property investment can take a variety of forms.
Selecting the wrong kind of financing can affect your property investment’s success. Before approaching a lender, it’s vital to know how the various options work.
Here are a couple:
Option 1: Home equity
Depending on the type of loan you choose, using equity to finance a real estate investment has its pros and cons.
Option 2: Fix-and-Flip Loans
Fix-and-flip loans are essentially hard money loans, which mean the loan is secured by the property. This loan allows you to complete your renovations so the home can be put back on the market as quickly as possible.
Option 3: Conventional Bank Loans
A traditional bank loan adheres to the rules set by Freddie Mac or Fannie Mae. It isn’t backed by the federal government, unlike the USDA, FHA, or VA loans.
7. Have a plan of exit.
When you decide to invest in property, you are likely to have a rough idea what you want to get out of it. The exit strategy will have a large impact on the success of an investment and it’s recommended to begin planning the exit plan prior to purchasing.
Here are a couple of exit strategies:
- Lease option – This is where you lease the property to a tenant who has a contractual option to purchase the property.
- Seller financing – This is an excellent method of exiting an investment property while continuing to produce a profit.
- Buy and hold to build equity – This is where you can sell a property for a profit as equity builds.
These are 7 tips to help make sure that you purchase the best investment property in Charleston area. They can make the difference between purchasing a lemon and purchasing a great property that has a high return on investment.
We hope this help!