Is it for You?
Do you believe that a diversified portfolio must contain real estate along with stocks, bonds, and mutual funds, etc.? Your tax attorney or CPA are the only ones that can help you decide if owning income producing property makes sense for your unique situation.
First you must decide what your goals are. Do you want monthly cash flow, resale of the property for quick profit; to hold the property for long term appreciation or use it for a tax shelter? The decision should be a part of your financial planning so that you can see the big picture.
Remember, when you have rental property, it is a business. It requires book keeping, record keeping, writing ads for prospective tenants, maintaining the property, and interacting with good and bad tenants. There is the option of having a property manager look after those tasks for you for a fee.
If you and your tax advisor decide that income property would benefit you, it is time to talk to your Real Estate Agent so that she/he can begin the process of finding you the best property for your financial portfolio.
Just as with other types of real estate, location, location, location is the primary concern. The property must be located in areas where people want to live. Are the schools good and nearby? Is crime under control? Is there easy transportation/travel into and out of the neighborhood?
Determine what stage of the cycle the neighborhood is in at this time. Is it a new neighborhood, mature neighborhood, a declining neighborhood or one that is being rehabilitated?
Is the timing right? Ask your Real Estate Agent to give you the details of the current market. She/he can help you make educated decisions about the property and timing by showing you what properties are selling for and how fast they are selling (supply and demand).
Make sure you educate your self about government controls. Is there rent control in the neighborhood and what is it? Also, you need to understand the what you as a landlord are responsible for when dealing with environmental hazards.
Owning income property can be very rewarding and can help to increase your financial portfolio if you take the time to learn all the factors to protect yourself. Start now by calling your Real Estate Agent and Financial Advisor.