If you’re ready to buy your first Santa Rosa investment property – congratulations. There’s probably a lot of energy around what you’re going to buy and what you plan to earn on your first rental home. Real estate investing offers a lot of opportunities, and it’s an especially great time to make a move in the Santa Rosa market.
To ensure a successful start to your investment career, we’re sharing seven points that you’ll want to consider before you close the deal and buy the property.
1. The market is competitive
California is about the only state in the country that’s not seeing a post-pandemic real estate boom. However, Santa Rosa is a little different. Our market is actually pretty hot right now, and it’s competitive. You’ll need to be prepared to move quickly when you find a property you want to buy. Other investors are aggressive, and they sometimes have cash in hand, ready to make an offer. Don’t let this rush you into bad decisions.
2. You need to establish investment goals
The best way to ensure you’re buying the right investment property and making the right moves is to know why you’re investing and what you hope to accomplish. Write down some goals and review them frequently throughout the process. Every investor has their own unique goals, and those goals will dictate what you buy, where you buy, and how you structure those deals.
3. Know your financial limits and needs
Establish a budget and don’t talk yourself into spending more than you want to. It’s also important that you know how you’re going to finance this investment. Are you paying in cash or will you be looking for a mortgage? Interest rates are still dramatically low, but they are creeping back up, so talk to several lenders about loan options. Don’t forget to budget for things like maintenance, vacancy, and professional fees in addition to your mortgage, insurance, and taxes.
4. Look for a rent-ready property
Don’t waste your time buying a fixer-upper. This is a common mistake that first-time investors make. You don’t want to spend a lot of time and money making big renovations and repairs. Instead, invest in a home that will be ready for the rental market right away. This will provide momentum and set you up for faster cash flow.
5. Estimate your likely rental value
Make sure you’re buying a property that will be profitable. Talk to local property managers about what you can expect to earn in rent every month. It can be a dramatic and unpleasant surprise if you buy a rental home thinking you’ll bring in $3,000 a month when the market really only supports a $2,500 rental amount. Know your rental value before you invest.
6. Talk to your CPA about taxes
Investing in rental property comes with a number of tax benefits. While you’ll need to declare your income as part of your taxes, you’ll also have the opportunity to make deductions for things like depreciation, maintenance, and travel to and from the property. You can also deduct the interest you pay on your mortgage and the cost of professional expenses like property management. Talk to a CPA or tax accountant so you have clear ideas of your tax benefits and liabilities.
7. Work with a Santa Rosa property management company
This is perhaps the most important consideration. Many investors hire Santa Rosa property managers after they’ve already bought a property. This is fine, but it’s even better if you partner with a management company before you invest. We can tell you how much rent you’re likely to earn, what kind of work will be needed to get the property rent-ready, and whether tenants will find the property’s location and condition desirable.
We’d be happy to help you navigate this process. When you’re looking for Santa Rosa property management services, contact us at Redwood Residential.