Here at the GM Maui Group, we really love what we do. Buying and selling houses can be a wonderful opportunity to create the kind of financial freedom you and your family have always been dreaming of. Today we’d like to share some of our top tips for the new real estate investor to help make sure that you are maximizing your investment and minimizing any potential headaches down the road. Let’s get started!
First of all, it’s important to know what outcome you would like to be working towards when it comes to that brand-new piece of real estate you’ve had your eye on. In general, buying a property to rent out can provide you with a healthy cash flow and a lower long-term risk profile as either a short-term or a long-term rental. Conversely, if you’d like to purchase a home to give it some TLC and resell, you’re likely to be engaging with both a higher short-term profit but also a higher overall risk. Market volatility and a host of other factors will all influence the outcome, so be sure to give plenty of thought as to your ultimate financial goals before purchasing.
Location, Location, Location
Sorry, we know…but just because it’s a well-worn classic doesn’t make it any less true! For example, investing in a property as a short-term/long-term rental will also require you to be mindful of its location within the community: the area’s available activities and amenities, walkability, etc. If you would like to attract tourists looking to get their snorkel on, then we probably wouldn’t look upcountry for our rental property! Make sure that you’ve considered all of the benefits and drawbacks of a potential property before making the leap.
A Penny Saved, A Penny Earned
In order to invest in the real estate market, it’s vital to have your own financial house in order beforehand. The real estate game requires a lot more than cash; there are financial implications to be considered at nearly every turn. To start up your very own real estate business, you’ll want to create an LLC, or limited liability company, to separate your personal assets from your investments. This will also protect you from potential litigation involving your personal finances, and can provide a number of tax benefits as well.
From there, make sure that you have enough cash on hand to close the deal, including the down payment and any closing costs! If the property itself will be a rental, make sure to budget enough income for ongoing upkeep and repairs to keep your guests coming back, along with a minimum of six months’ worth of expenses for unexpected vacancies. If you’re looking to flip the home for a profit, be prepared to carry the monthly mortgage loan yourself for however long it takes to complete the repairs and sell.
Buying your very first investment property is an exciting experience for sure, but it can also be filled with anxiety if you’re not sure what to expect. Careful thought and planning along the way will help to give you a leg up on the competition, along with receiving expert advice from the best in the biz. Give us a call at 808-891-8989 to let the GM Maui Team help you get in the game today!