Buying an Investment Property in Richmond VA
Buying an Investment Property in Richmond VA - Last year my husband and I jumped into the real estate investment arena. No, we don't purchase homes for sale in Richmond and then flip them. We know our own limitations and home improvement/renovations is not in our wheel house. Instead, we are landlords. With rents increasing 52%
over the last 14 years, we determined if we "buy and hold
," we would be a great position to add to our retirement funds.
Rookie Mistakes When Purchasing a Rental Property
Our first investment property was bought in 2013 for $230,000. It is a 2500 square foot townhouse with 3 bedrooms, 3.5 baths, and in a popular location. The condition of the house was excellent and we put in about $1,000 to make the property more appealing to renters, installing a microwave, painting the entire interior, and fixing small repairs that came up on our home inspection. (Tip
: ALWAYS get a home inspection, investment property or not!) The extra little effort paid off as we had two qualified tenants submit applications right away at the full rental rate of $1,500. Why did we select this exterior townhouse unit as our first investment property? Because this is a place I could live should we ever be put in a position where we couldn't afford our primary residence.
So where is the rookie mistake? Well, it isn't a "mistake" per say as we are cash flow positive and our first tenants renewed their lease, which is always a plus. However, I realized something this year when we began the process to purchase our second rental property: We could purchase a smaller townhouse in a different location for $120,000 and receive approximately $1150 in rental income. This means we could have purchased TWO rental properties for the price of one! Thus, we would be purchasing our THIRD investment property this year instead of our second. (Tip
: You know how we real estate agents say: Location, location, location? Well, with investment properties I say add to that: Research, research, research!)
Hiring a Property Manager for Your Investment Properties
While I have some clients who have purchased a rental income property and manage it themselves, this is something my husband and I wanted no part of. We don't want to deal directly with our tenants and, frankly, we don't want any 3am phone calls informing us of a pipe burst! Instead, we hired a property management company to do the heavy lifting for us. Now, to do this we had to make sure we would still be cash flow positive after paying the mortgage, HOA, home owners, and the property management fee, which is often 10% of the monthly rental rate. This takes a careful examination of your income, savings, and projected rent. After we factored in all of the numbers, we came to the conclusion we would receive about a 9-11% return on our investment, even with the property management company fee. Not bad!
Is Investing in Richmond VA Real Estate Right For You?
As a Richmond VA Realtor I believe real estate is a great way to build wealth...over time! Sure, you can get into the flipping business and maybe make a quick buck if you know what you are doing, but I am talking specifically about building a portfolio of rental investment properties.
Is investing in Richmond VA real estate right for you? That depends on your finances and your tolerance for risk. Leverage is the key to any growing business and for us, real estate is absolutely the path to financial independence in the future. We already have experienced several unexpected items that came up with our first investment property which kept our cash flow to a minimum. However, we anticipated these things would happen and thus created an emergency fund with the positive cash flow we did receive thus we did not have to come out of pocket for those expenses. (Yep, a pipe did burst in the cold winter months. Boy was I glad we had our property management company dealing with THAT!)
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Richmond VA Real Estate
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? Contact me, your Richmond VA Realtor
at the RVA Home Team
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