Buying your first investment property can be an overwhelming experience, especially in a growing real estate market like Santa Rosa. As a new investor, you have many tasks on your plate like finding the right neighborhood, selecting the type of property, studying the real estate market, and negotiating with the seller. If you plan out these tasks well and work smartly, you can have a smooth and hassle-free investment experience. If not, well, it can be nothing short of a nightmare.
Here are some tips to help you reduce the stress of buying your first Santa Rosa investment property.
Set Clear Investment Goals Before Buying Your First Investment Property
When you set goals, you are significantly less likely to get confused about the type of property or waste time. Some landlords purchase properties without knowing their goals and end up overspending or choosing an unsuitable property. Don’t be one of those landlords. Start wisely, to choose smartly.
Identify The Purpose of Your Investment
It is extremely important to know the purpose of investing in the Santa Rosa real estate market.
- Do you want to create a real estate investment portfolio?
- Do you just wish to have one rental investment as a backup for your retirement?
- Do you aim at continuing the rental business or wish to sell the property in a few years when you move out of the state?
Have clear expectations from your investment and it will become much easier to shortlist the types of properties that meet your needs.
Decide The Type of Santa Rosa Property You Want to Invest In
The type of property determines the expense and your responsibilities as a landlord. You might think that you want to buy a residential property. But that’s not enough. You must know if you want to buy an apartment, a single-family unit, a multi-family unit, a condominium, or a vacation rental. Know what you are looking for in the property in terms of the number of bedrooms, bathrooms, and the yard. Decide if you want to buy a new house at a high price which you can rent out immediately, or a fixer-upper property at a lower cost which you can renovate and rent for more.
Take a Tour of Open Houses in Your Chosen Neighborhood
Save a specific time or a day in the week to visit the open houses in your shortlisted neighborhoods. When you see different kinds of homes within a short amount of time, it becomes easier to know what you want and what you don’t want and choose your type of house, the locality, the amenities, and other details.
Be Patient to Find a Good Asset
The process of buying the right property can be time-consuming. You might not get the best property at the best price within a specific duration. There are many parties involved in the process, and you will most likely have to wait for your property manager, real estate agent, loan manager, or the property owners to get back to you.
Depending upon the market, it might take you anywhere between 3 months to a year to find the right asset, get the necessary paperwork done, and buy the unit at a desirable price. Setting goals is always helpful, but don’t set a short time limit for the purchase unless absolutely necessary.
Buying your first investment property is going to give you lifetime returns. Be patient and flexible throughout the process.
Study The Real Estate Market of Santa Rosa
Studying the local real estate trends is the best advice that we offer to first-time buyers. When you know what types of properties are making the most profit and are in high demand, you can choose a home confidently.
Note the Demand Trends
Santa Rosa is becoming a seller’s market, which means there are more buyers and fewer sellers in the market. The rates have also increased over the years. The median selling price is approximately $878,382, the median price per sq. ft. is $526, whereas the median home size is nearly 1,939 sq. ft.
Residential properties are in high demand, and the most popular real estate neighborhoods are West Junior College, Oakmont Village Association, and Wright Area Action Group.
Check The Average Rent Price
Studying the rental trends in the local market makes it easy to set the right rent price for your unit. Start with studying the rental prices of similar properties in the neighborhood. The average rent price of Santa Rosa’s apartment is currently $2,096. This will give you an idea of what your rental income might look like.
Additionally, consider the amenities in and around the unit, smart appliances, or other benefits that the location and the unit offered for a more accurate rental analysis. We recommend you get a free rental analysis that will help you estimate your profit and make the decision easier.
Budget Appropriately for Buying Your First Investment Property
Decide on an investment budget and stick to it. Keep a margin of price flexibility but don’t be tempted to wildly raise your offer even if you find a property that looks exactly like your dream home. Doing so can lead to a stressful repayment experience. Here are some tips to ensure that your journey as a homeowner is financially smooth.
Find Prices for Similar Homes
When you like a property, check out the prices at which similar properties in that neighborhood have been sold out for. See if any homes have been sold out recently, and inquire about the prices. This will help you make realistic offers that often meet the seller’s expectations.
Learn About Different Mortgage Facilities
Study the different loan options to find the best investment property loan for your first investment property. Lenders typically require you to put 15-20% down payment for an investment home. The best piece of advice for you would be to choose the right type of loan at the right interest rate and plan your mortgages and all the costs thoroughly before choosing a loan. The different types of loans are:
- Conventional Bank Loans
- Hard Money Loans
- Private Money Loans
- Home Equity Loans
- Federal Housing Administration Loans
- Veterans Affairs Home Loans,
- Portfolio Loans
- Blanket Loans
- Home Equity Line of Credit Loans
Besides, there are loans specifically for first-time investors as well. Talk to a property manager to get the best available loan at a manageable rate of interest.
Improve Your Credit Score
The better your credit score, the easier it is for you to get a loan for your first investment property. This may differ from case to case but lenders typically prefer candidates who have a high credit score as it proves that they are responsible and have the ability to pay off their mortgages on time. To improve your credit score, you can
- Pay off your previous loans
- Avoid late payments as much as possible
- Check your credit utilization and try to keep it below 30%
- Keep your old credit accounts open, and use credit monitoring services
Get Pre-Approval for Your Loan
Getting pre-approval for your loan can speed up your purchase. Sellers typically prefer negotiating with the buyers whose approved loans offer a sense of more security. Also, once you finalize the property, you won’t have to be worried about waiting to hear from the loan company or don’t have to ask the seller for some extra time.
Save For Upfront Costs
You must know the upfront costs, estimate them well, and be financially prepared to bear them. These include the initial deposit, the down payment, taxes, escrow fees, insurance, legal fees, and property management commission. The costs can go up to thousands of dollars. Besides, most of these are mandatory for secure purchase, so save enough for them.
Factor In Renovation and Maintenance Costs
When you buy a new property, you only check if it is habitable. However, it may take some effort to make it rent-ready. You may need to get the essentials like knobs, faucets, or latches fixed. You may need to buy appliances, add smart upgrades, and install amenities that make the property rent-ready.
If you buy a fixer-upper, you may even have to start from scratch and renovate the house completely. Calculate these expenses well with the help of experts to avoid any unforeseen overheads that cause you to overshoot your budget.
Inspect The Santa Rosa Property Thoroughly
A thorough inspection of any property is extremely important to ensure that the unit is habitable and that there are no severe problems. Some issues like structural damages can be deal-breakers and must be brought to your notice beforehand.
There could be any issues like improper roofing, plumbing, chipped or bubbled paint, damaged furniture, or unsafe HVAC systems. A non-expert cannot detect all these problems. Therefore, we highly recommend you to get the property inspected by a professional property inspector.
You can negotiate the price and get it at a fair price if there are any damages in the rental.
Be Ready to Negotiate With the Seller
While it is understandable that negotiating the price in a seller’s market like Santa Rosa may not be an easy task, don’t cross out the option completely. Check the inspection reports, and if any repairs need to be done, either ask the owner to get them done before the purchase or compensate for the costs of these fixes. There is a great scope of negotiating when you buy a fixer-upper. We highly recommend that you get an expert to negotiate with the seller on your behalf to get your home at a better price.
Hire A Professional Santa Rosa Property Manager
They understand your needs and expectations and use their resources to find the best suitable option that fits your budget. Once you hire a trusted property management company like Redwood Residential Property Management, you won’t have to worry about looking for properties, inspecting them, negotiating with the owners, or handling all other landlord responsibilities.
We have been helping new investors to make the best property decisions for decades and our only goal is to make this journey easy, stress-free, and profitable for you.
For more information on how we help first-time investors build a stellar real estate portfolio, contact us at Redwood Residential Property Management.