Should I Invest in Residential Properties?

Leasing a house

Renting out a residential property can be a big investment, are you up for the task?

To fully understand residential properties, you must first know what you are buying. There are several different types of properties that you can choose from and each of them involve a different level of monetary and time investment from the owners.

Single-Family Homes

These homes can yield 15 to 35 percent of the total value of the property. There is an opportunity to “flip” these houses but also to rent them out. As long as the house is well maintained and the community is thriving, they maintain their resale value. Single-family homes also have lower property taxes than larger properties and can have lower property management costs if the tenants are responsible. If you ever want to sell your investment, these homes sell much quicker than larger units. Although these homes are good to own, the income is less diversified than in multi-family units. If the tenant moves out of the home, you will not have any cash flow until the property is rented again.

Duplex/Multi-Family Homes

These houses consist of two to four units and are popular with investors just starting out. These houses have a less risk for no income. Because they are multi-family houses, if one tenant moves out, you still have other tenants paying rent to help you through. They are always in demand from renters. If the house is less than four units, there is no need for special financing. Not everyone wants to live in a multi-family home, so marketing is key when advertising your property. It is also important to remember that turnover rates are much higher because the property must be cleaned and repaired after a tenant moves out. The possibility for repairs is also high as something in one unit may affect another.

Apartment Complexes

These units will be a significantly larger investment in both time and money. This type of property has a good return on investment. If you opt for a professional management service, it will be lower because it is spread over multiple units. If a tenant moves out, it will have a minimal impact on the owner. This type of property does require a special loan and includes a higher down payment and reserves. Management fees will eat into your profits and it is vulnerable to the community since all the units are in one place. With multiple units, there is a possibility of having tenants who are not the best and this could result in a frequent turnover.

Residential Investment Properties with Clagett Enterprises

Investing in residential properties is a lot different than any other kind of real estate because of the investment you must make with your time and money. Things will always have to be fixed and people will always want your time to fix them. However, when things are running smoothly, real estate can be a great investment towards your future.

At Clagett Enterprises, we have extensive experience serving the greater Frederick area and Western Maryland, since 1987. Our team is a full service real estate company that’s ready to help you with your real estate needs. Speak with a Clagett professional at 301-665-6009, or request a proposal for preventive maintenance here.

This entry was posted on Thursday, July 16th, 2015 at 7:49 pm. Responses are currently closed, but you can trackback from your own site.