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With a recovering economy, strengthened job growth, and healthy housing market, many New Braunfels homeowners are actively seeking out investment opportunities to earn a hefty profit. The New Braunfels metropolis is ripe with investment properties due to the city’s financial firms, data centers, and other prominent industries that facilitated the resurgence of ample job creation in the area. The city even made Forbes’ Best Buy Cities list, a compilation of the top 20 housing markets to invest in 2016. If a homeowner is interested in buying property to diversify their financial holdings beyond risky stocks and bonds, there are few better investments than houses for sale in New Braunfels.
Before making the leap into a legitimate property-owning mogul, potential investors must be informed. Defining an investment property and understanding what constitutes a proper investment will help buyers establish the primary goals of their investing endeavors, allowing them to succeed.
According to multinational mortgage giants, residential property is classified into three broad categories after purchase:
While income can be generated by renting out a second home to a certain extent, the second home’s primary function is to serve the homeowner as an additional residence and not to procure funds. Many mortgage companies impose strict rules and regulations to keep buyers from misidentifying a property’s category and benefiting from leaner taxes.
Whereas residential and second homes are generally forbidden to receive revenue from renting or time-sharing, investment properties are sold as return on investment (ROI) projects. They are bits of real estate intentionally purchased to make money through either rental income or the future resale of the property after major updating. Sometimes, buyers seek out properties that will satisfy both, guaranteeing long term financial gain.
Since acquiring residential property can be a hassle for the majority of buyers, many investors are deterred from pursuing the highly lucrative business opportunity. Also, the unknowns are limitless when considering to buy a house. However, the multiple ways to invest added onto the flexible time span of the actual investment makes the possibility more appealing.
Before beginning the buying process, investors must consider how they want to utilize the property to meet their end goals. Investment properties in New Braunfels can be either short or long-term investment opportunities depending on the buyer’s vision of the home. After purchasing the property, buyers have two viable options that yield vastly different results: either buy and rent out the property to generate steady monthly income or update the property to resell at a profit.
Renting an investment property can be complicated. The property must not only be in the ideal location for repeat renters, it must also be updated and come with numerous amenities. The cost for these renovations can set investors back thousands, depending on condition of the home on day of purchase. Renting also means being available to address and fix broken appliances, major home repairs, and general accidents at the behest of tenants. This requires investors to either be on-call daily or hire a management company, further eating into potential profit.
On the other hand, some investors gravitate toward flipping a dilapidated home with the goal of reselling at a much higher price. Whereas renting allows homeowners to earn a small amount of profit over time, reselling a recently remodeled home – also known as flipping – provides a large sum upfront. Investing in a property that needs work prior to profit has it’s own disadvantages too. A rehabbed home’s expenses often times includes staging fees, hiring realtors, renovation expenses, the lack of renters to mitigate financial losses, and numerous others.
Despite the potential pitfalls, investing in real estate can be quite lucrative to smart buyers. Knowing whether renting or flipping is a better strategy to meet your personal goals is vital to succeeding as an investor.
After investors understand what investment properties are, their financial benefits and pitfalls, and can identify whether they’d rather rent or flip, it’s time to buy the investment home of their dreams. Before stepping into the fixer upper that will earn thousands, there are a few general guidelines and tips for the actual sale.
While many investors can afford cash offers for an investment property, even more cannot. Paying the sale price in its entirety can leave an investor without the necessary funds to remodel and resale. For those that want a little more money to cover any unexpected expenses, acquiring a mortgage is a must.
Homeowners familiar with mortgages might know how to apply without much instruction, but receiving financing for an investment property is a bit more challenging when compared to a primary residence. Typically, lenders refuse to provide mortgage insurance for investment homes; as a result, they require a whopping 20% down to ensure bank financing. Major lenders may also require impeccable credit scores and proof of savings to cover half a year of expected expenses, in case of an emergency. These harsh contingencies dissuade many investors from buying properties in bulk and lowering potential price points on the property.
Investors are tasked with determining the most profitable use of a property without the foresight of future economic struggle, market crashes, or dreaded depreciation. To combat these unknowns, buyers must find homes that need major repairs and upgrading but are still located in desirable destinations. While the home can be renovated, the location cannot. Carefully consider the property’s locale before committing to a sale.
Expedite the home buying process by communicating with the seller directly. After researching comparable properties in the same neighborhood and factoring in substantial repairs, deliver an offer that will meet your needs as an investor. It’s essential to remain in contact, especially if the offer is countered. Showing interest in a fixer-upper that’s been sitting empty for months might be enough to close the sale while remaining within your budget.
After securing the sale, the investment property is officially yours. To earn a profit as soon as possible, renovations should be the top priority. Depending on the state of the property at purchase and the contractors hired to assist in the rehab, a typical renovation can last from four to eight weeks. Don’t hemorrhage your savings and loan by wasting time. Prioritize your remodel, and reap the benefits of becoming a successful investor in New Braunfels.
If you are looking for houses to buy as investment properties, I can help. Buying investment properties is simple with We Got Deals. We specialize in wholesaling houses to people interested in buying for investment purposes. Want to flip the house and put it back on the market? Or maybe you’d rather have a long-term source of profit by renting the house. Either way, we would love to sell to you! Call us today at 830.632.2299. We look forward to talking to you about your investment properties, or answer any questions you might have.