Income properties are a great way to stabilize your future financial health. Some people prefer to invest in the stock market, but for the pragmatically inclined individual the best option for securing your future is found in real estate. Being a landlord means you are essentially running a small business of your own without having to do very much to keep it profitable. Sure you will get a call once and a while to change a lightbulb or make a new set of keys, but the overall amount of time spent managing the property is far lower than a hobby investors researching potential stock investments and worrying about which to choose. It is definitely true that, when people talk about passive income opportunities, what they are usually referring to is owning property and collecting rental income.
If you are considering owning a rental property, there are a few important issues to consider before diving in. This is especially true in the Bay Area, a region marked by pricy houses for sale and fewer than average apartment or condo properties to invest in. Indeed, the first consideration regarding income property potentially must be where you want to invest. If it is in the Bay Area you may need to get creative with what you invest in, because renting a fully functional home is not the easiest course of action.
Aside from choosing a location, there are three important things to consider before investing in an income property.
1.Will the Area Appreciate in Value?
The worst outcome for you as a potential investor is buying in a part of the city that is depreciating in value. Usually this means avoiding areas that are on the upper end of the price spectrum – like business districts and densely populated areas with plenty of established owners. As you can tell by looking at houses for sale in San Diego, there are some areas of the city that would cost too much to make any rental profit from.
The exciting challenge is finding a region of the city that is going through a gentrification stage on the path to a fully established neighbourhood. You have to look at it from the perspective of someone renting a property rather than someone looking to buy (like yourself). Pick an area in which young people are renting in droves and that offers sufficient economic growth potential that you can be sure, in 10 or 15 years, the area will be highly sought after.
2. Do You Take A Mortgage or Line of Credit?
This depends on your current financial situation. A line of credit is a harder thing to qualify for, but given the fact you already own a property it should be relatively straightforward. In all cases you should be looking for a financing option that gives maximum flexibility and low interest rates.
3. Will You Be Around Long-Term?
If you have designs on moving cities anytime soon, buying an income property is not a good idea. Absentee landlords make for uncomfortable situations in which the tenant feels under-appreciated and thus more likely to move out. Any months spent without a tenant are obviously detrimental to your bottom line, and the best way to avoid such a circumstance is by being around to ensure your tenant is happy.