Long Term Real Estate Investment
For those who are not just looking for a quick return, long term investing provides a viable option with a potential for high profit. Long term investment requires much more effort and commitment to maintenance than a short term real estate investment, where one just does enough rehabilitation work to turn a profit quickly. Long term investors purchase a property in an area where the long term appreciation rate appears favorable and rent the property to tenants, acting as landlord and taking care of all the maintenance that the property requires, while profiting from the monthly rent checks while waiting for the property value to rise enough to sell it for profit. As with short term real estate investment, there are several factors that must be considered in order to secure a successful investment;
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- You are able to deal with renters.
- You have investigated the possibilities of a continuous tax break.
- The long term appreciation rate for the home is positive.
- You do not have the start-up capital at the moment, or you do not wish to do quick renovations to sell the home for profit immediately.
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Long term investment as mentioned above requires constant maintenance of the property in order to keep its value higher, thus increasing the amount the investor can charge in rent. Landlords who consistently defer maintenance in order to cut their short term costs are always renting out their properties to new unhappy tenants, seeing their properties vacant for prolonged time periods due to their lack of appeal, and getting tenants who actually inflict more damage to the property.
Smart long term investors avoid situations like these by repairing all minor damage when it arises, thus saving money on having to fix a huge problems that occur when the minor injuries have been ignored for too long. These investors keep to strict maintenance schedules and keep a readily accessible list of people to call when any repairs are needed to perform them quickly and keep the tenant satisfied.
Sometimes even the most cognizant investors face problem tenants, so choosing the renters is an important step when committing to a long term real estate investment. Avoiding irresponsible, unreliable people who don’t maintain the property is important, as is writing a valid lease that covers the significant aspects of the rental agreement.
A complete lease agreement covers the who, what, when, and how, and also includes a carefully designed set of rules (pets, etc.) and policies on a security deposit. Laws on real estate rental contracts vary in each locality, so it is important to be well-versed in the specific policies of every region to ensure the legality of the agreement.
Long term investments also carry several risks that the smart investor tries to minimize in the beginning stages of the investment. Investors should prepare for a worst-case scenario, keeping enough capital devoted to the property to maintain their investment if there is a vacancy or a decline in the market value.
Keeping a strict eye on local trends is essential, and this task can be greatly alleviated by having contacts in the local real estate industry (such as appraisers, brokers, attorneys, and other investors) who are cognizant of market patterns. Investors must allot money for repairs, set a realistic rent cost and schedule, and plan an exit strategy.
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