Advice For Real Estate Investors

The Phoenix area is ripe for investors now and has been for some time. From 2001 there was tons of money being made as people just saw huge price run ups and huge capital gains on their rental properties.

From the end of 2006 the opportunity was buying depressed properties at a steep discount then either renting them out or flipping them for a quick profit.

There are some areas to be concerned about though before becoming a real estate investor. Karen Blumenthal of the WSJ does a great job in her article “6 Mistakes Housing Investors Make” of addressing the hidden issues.

Mistake 2: Overlooking key costs.

Knowing the potential rent isn’t enough. Before you buy a property, you should also factor in closing costs of 3% to 6%, the costs to fix up the place and maintain it, and your holding costs. Then add the profit you expect to make (and more closing costs, if you intend to turn around and sell it). Only then can you figure out what you can afford to pay.

That’s a very good article. Definitely worth the read if you are thinking to get into buying properties to rent.

One point I’d like to add is research the HOA very thoroughly before you make a purchase of a rental property. In some of the nicer condo’s around Scottsdale the HOA costs can be a very significant proportion of the monthly maintenance. In addition to the normal monthly fees you can get hit with assessments. A large assessment can easily blow up a year or two profits.