A Newbies Guide to Investing in Western New York
Should I look into real estate as a way of investing?
1) Are you looking for a long term investment?
If the answer is yes, then Western New York is a good place for you. Buy and hold properties are available with positive cash flows. There are costs associated with buying and selling properties, so if need your cash back soon, buy and hold real estate is not for you.
2) A stable investment.
Property values and the rental market in WNY both are very stable. You can expect 2 – 4 % increases in property values on average. The booms and busts you see in other markets do not exist in WNY
3) Rates of return for of 18% and higher are achievable, but actual values are highly dependent upon how you finance the property. Cap rates (defined as Net Income (excluding financing)/Purchase price, are anywhere between .1 and .2 depending on location.
Where should I begin?
1) What kind of property do you want to buy?
a) If you currently rent
Many people like to make their first property a duplex, with the tenant helping pay for your mortgage. This is a good way to get your feet wet.
b) If you currently own your own house
In this case, small multi family homes usually make the best sense, with 3 or 4 unit properties being the most profitable.
2) Where should I buy?
There are known rental areas throughout WNY where investing makes sense. There is a relationship between risk and reward when investing. Lower income areas will have higher rates of return, but may have higher vacancy rates and higher monthly repair bills.
3) What do you need?
a) Quite simply, the first thing you need to proceed is cash. If you plan on financing, you will need to put down 20 to 25% of the purchase price. You will also generally have to pay the first years taxes, and insurance up front. Lastly, you will need to pay your legal fees as well.
b) Patience! Yep, closing on a house takes time, and banks will ask for a lot of information. Respond to your bank and to your lawyer as quickly as possible to keep the process going.
c) Things the banks will look for typically include
i) Pay Stubs from your past 2 weeks
ii) Last two years Federal and State Taxes
iii) Copies of Rental Agreements
iv) Proof of Funds (showing that you can pay the 20-25% down payment)
v) Proof that you purchased insurance for the property
d) Other things you need to do include
i) Have your home inspected.
ii) Work with the bank to get the property assessed to assure the bank the property is worth what you are paying for it.
How about property management?
This is where C & M Rental is here to help.
Handling routing maintenance, tenant placements, dealing with the various government agencies that provide rental assistance are all things that C & M Rental can help you with. We have a full time staff dedicate to interfacing with our tenants, our maintaince crew as well as government agencies.
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