Zetpol Property - the best solution to Real Estate Industry

2010-11-01
How to find good Investment Property?

How to find good Investment Property, using Zetpol Property System ?

The idea of owning Rental Real Estate seems to be gaining popularity as investors looking for other possibility to make good return against present Stock Market. However, not everyone has what it takes to be a Landlord. But those who do, may find rentals to be a good way to build wealth. Once you have made the decision to buy Rental Property, your real work begins. Finding a profitable rental property usually takes time, good source of information, connections and plenty of research.

Here's what you need to know to get started:

Know your time horizon

As with any other investment, you should have a good idea, how long you plan to own a Rental Property before you buy it. The longer you plan to own the property, the more you will probably need to invest in maintenance, repairs and improvements.

If you are keeping it for 20 years, at some point you are going to be putting a new roof on that property. You are going to be putting in new appliances and doing some major repairs. If you are only planning to own a property for five years, by contrast, you will probably want to avoid making any major improvements, unless you are sure, you can recoup the cost with a higher sale price.

You also may face more investment risk with a shorter time horizon. Although your rental will almost certainly appreciate over 20 years, it could easily lose value in the next five, particularly if you are buying in an overheated market. You will need a bigger potential annual return, to make up for that risk.

For many small investors, long-term ownership makes the most sense. You'll have plenty of time to ride out any swings in the market, and rental income can make a nice supplement to your day job. Find enough Rental Properties, and being a Landlord may become your day job. Good relationship with reputable Real Estate Agency like Zetpol Property can secure your good return. Being a Member of the Zetpol Property System or even working with any professional Agent of Zetpol Property, will save you a lot of time, risk and trouble to close transaction.

Develop your own network using Zetpol Property System

Experienced Landlords find their Properties in a variety of ways. Some hunt for foreclosures, making friends with city hall clerks or bank employees, who know which properties are about to be sold. Some run ads in local newspapers. Others work with Real Estate Agents, who keep their eyes peeled for possible buys. Several Landlords recommended joining a local landlord or property owner's association to make contacts.

When you begin to own rentals, all the other investors start coming out of the woodwork. Through investor meetings, networking, etc., you can find out what is for sale. You also can try approaching Landlords directly to see, if they are willing to sell, by calling the numbers listed on rental ads in the classifieds or by cruising neighborhoods looking for "For Rent" signs or by talking to any Landlords you know personally. The Landlord of the three-unit building, where one Tenant had rented for 15 years, was tired of the hassles and ready to sell.

They love the area and jumped at the chance to buy it. They have been pleased with their purchase. They raised rents and required security deposits, which caused the property's less desirable tenants to leave. They also have a backup plan for the building, in case, they start to feel like the prior owner. If being a Landlord got to be too big a hassle, they would just get rid of the tenants and make it their own place.

Get your finances in shape

The better your credit, and the less credit card and other consumer debt you have, the better your prospects for getting a decent loan. Lenders usually require bigger down payments, higher interest rates and generally stronger finances, when you are buying Rental Property. That's because they know, people are more likely to default on investment property than they are on their own homes. Landlords say, it also pays to have a substantial cash reserve left over after buying a property. This can help pay for unexpected repairs and vacancies. Although there are few rules of thumb, setting aside at least one month's rent for each unit is a good start. Some suggests having a line of credit, secured either by the property or your own home, to cover larger costs.

You also should make sure you can save enough for retirement and other goals before investing in Rental Real Estate. While rental income can supplement your retirement kitty, most people shouldn't count on it to replace other investments or allow themselves to be entirely exposed to the whims of the local Real Estate Market. Rents and property values can fall as well as rise, and those who are adequately diversified with investments in stocks, bonds and cash, will be better able to endure the bad times as well as the good.

Avoid overpaying

Our experience shows as "You make your profit when you buy a property, not when you sell it." Pay too much, and you will never recoup as much as you could have had you driven a better bargain.

The Rental Real Estate Market is generally tougher on investors who overpay, than on homeowners who do the same thing. While a home is often an emotional purchase, which can lead to "I must have it!" offers and bidding wars, most Landlords look strictly at the numbers to see, if their investments will pay off. If you pay too much for a rental, you can't count on a "greater fool" coming along later to bail you out.

Not overpaying can be tough in a hot market, like Cape Town or Sandton - Johannesburg. Some Landlords use formulas, such as not paying more than eight to ten times the rents they expect to make the first year. Others try to estimate what the property could be worth after needed repairs and upgrades are made, and they don't pay more than 85% of that price, less the cost of those repairs.

Every Real Estate Market is different, however, and these formulas may not work in your area.

What's key is to make sure, your rental income will cover your out-of-pocket costs. That includes the mortgage payment on the property, as well as taxes, insurance, maintenance, repairs and a vacancy rate of around 5%. If you can at least break even, you'll be able to profit from any price appreciation as well as from tax breaks available to rental property.

When crunching the numbers, you should know, that there is a big difference in, how repairs and improvements will you treat for tax purposes. You can typically deduct the cost of a repair, such as patching a roof or fixing a leaking pipe, on your tax return for the year in which the repair is made.

Replace that roof or those pipes, however, and it is typically considered an improvement, which means the cost can't be deducted. Instead, it is added to the amount you paid for the property to determine your tax basis when you sell. The higher the basis, the lower your taxable profit. But if you have to wait 20 years after making a major improvement to recoup any of the cost for tax purposes, you may think twice about buying a property that needs a lot of upfront work.

To better estimate your costs, get a thorough inspection before you buy a property. Some Landlords have favorite electricians, plumbers and contractors, that they send to any prospective property, promising them that they can do any repair work they find. Others use professional inspectors they trust. Longtime Landlords say, all this work pays off in profitable properties that build their net worth while providing a steady income stream.

It doesn't matter if you're a professional or a laborer, the purchasing of Rental Real Estate Properties at the right time and for the right Price, is giving the equal-opportunity for everyone as wealth builder. Don't hesitate! Contact our Agents of Zetpol Property for professional advise and available Property.


Zbigniew Patela, M.Sc.

Managing Director

Zetpol International
http://zetpol-international.com/
http://zetpol.point2homes.biz/
 

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