7 Critical Considerations for a Real Estate Investment Property Purchase

If you are considering an buying an investment property, there are 7 important items to consider.

1. Financing, typically lenders will only lend up to 65 percent of the value of the property when it’s for investment purposes. This limit is in place because lenders consider an investment property a higher risk

If you have equity in your current principal residence or in other property, then you may wish to borrow from those sources to maximize your mortgage and financing Generally speaking your investment property. The reason for this objective is because you are allowed to use mortgage interest paid on your investment property to reduce the amount of income and hence tax paid on your investment property.

2. Another important consideration for your investment property is choosing the best location. If you are considering a townhouse or a high-rise condo for your investment, then you want to ensure that it is located close to major shopping, transportation and schools and amenities that will appeal to prospective tenants. Often tenants will only have one vehicle and require these types of amenities to be located close to the property. You will usually get higher rent when your location is desirable.

3. Generally speaking, a high-rise condominium will allow you the most flexibility and least amount of effort and maintenance during the tenancy compared to any other type of property. Once a high-rise condo is rented, it is nearly a hands free investment. This does not come without any cost, as the maintenance fees associated with a high-rise condo will be much higher compared to a townhouse or other type of property. Your second choice for maintenance free investment property may be a townhouse. The reason is that all of the exterior maintenance, such as snow shovelling and lawn and garden maintenance will be taken care of by the condo corporation and not the tenant. The only items that you and/or the tenant will have to take care of are the interior items and these are usually minor in nature.

A freehold townhouse, semi or detached home will require more maintenance and effort on your part and the tenant throughout the year. This may be more desirable or not, depends upon your circumstances. Many investors choose freehold properties for their investment properties as they have the time or prefer to do some of the maintenance themselves or at least have control over the entire property compared to condo type properties.

4. As a continuation of the items considered in number 3, these different properties will appreciate at different rates, all things being equal. For example, if a high-rise condo has an appreciation of 10% in a year, then a townhouse may appreciate 12 to 14% and a freehold property may increase 15% or more. This larger appreciation would be offset by the fact that more maintenance may be required by you the owner.

5. It is important to consider all the expenses when you purchase an investment property. The obvious expenses are the principal and interest costs associated with the mortgage or financing on the property, the annual taxes and any monthly maintenance fees if the property is a condominium.

You may wish to consider regular maintenance items to protect the value of your investment property and the systems that are associated with your property. Other expenses you may incur are regular maintenance items such as furnace cleaning and maintenance and inspection. This is a very important item if your investment property is a freehold. Other items such as the condition of the roof, foundation, interior and exterior walls and windows, appliances, lighting and window coverings, electric garage door openers and any other systems or items that are mechanical in nature should be checked on a regular basis to not only protect the value of your investment but also to prevent the failure of these items as opposed to regular maintenance.

6. Once you have purchased your investment property your other major consideration is finding a good quality tenant. In my nearly 20 years of experience I have found that there are two major considerations in your tenant. The number one consideration is that you find a tenant who has the ability to pay the rent and if possible can show a good history of paying the rent. The second most important item is to make sure that your tenant will take care of the property for you in your absence.

Other items you will have to consider are that you must investigate the credit worthiness of the tenant, their personal and credit history, their employment status and confirmation of employment. You may contact their previous landlord and personal references that they supply on the application. These items can be critical and will give you insight into your prospective tenant. In my experience, the degree to which a prospective tenant completes all fields on a rental application and provides all the information you request and is straightforward and forthright with all answers to your questions and inquires will give a good indication of the quality of the tenant that you are looking at.

7. You have to decide to find the tenant yourself or use a real estate agent. When you attempt to find the agent yourself, you can personally meet the tenant ahead of time and see the type of people that will occupy your property. You will have to do all the credit and personal investigations of the tenant. I have found that when you use a real estate agent to find a tenant for your property, the quality of the tenants are usually better than through private means. The reason for this is that tenants who are relocating with their company or those tenants that have better employment and personal history know that the properties on the mls are better compared to the private properties and will utilize the mls to find their property. As well, the mls is a much more efficient method of finding a rental property and many tenants use the mls to find their next rental.

Of course, a real estate agent can find you a good quality tenant and perform all of the credit and personal investigations on your behalf. In the Toronto and GTA, the typical fee to have your property rented through the mls is one months rent commission.

Conclusion

As you can see, there are many important items to consider with an investment property that you are considering to purchase. Your personal situation, financial ability and degree of involvement in your investment property will ultimately determine the type of property that you will purchase.

Mclean Virginia Real Estate – The Apartment & Condo Communities of Tysons Corner

Below are housing options every current and new resident to Tysons Corner should consider.

Tysons Corner VA Condo Communities The Fountains at Mclean – Built in 1988 this luxury condo community in Tysons Corner is located within walking distance to the Tysons Corner Mall, Freddie Mac and the Tysons Westpark Transit station. Busses from this station leave frequently for Weshington DC, the West Falls Church metro, Arlington and Reston Town Center. The Fountains (FAM) has a long standing reputation as one of the best investments in Tysons Corner. The community is know for it’s stepped, three level fountains located on the grounds and major common areas. Spacious one and two bedroom units with underground parking, on-site fitness facility, pool, tennis courts and clubhouse make FAM one of the most desirable communities in Tysons. The Fountains at Mclean offers condos for sale starting at approximately $260,000.

The Gates of Mclean – This community is located close to the intersection of 123 and 495 (the beltway). It boasts accessibility to the major thoroughfares of Tysons Corner. The community spent a short stint as apartments and then went to condo ownership a few years after. Well known for its clubhouse with 30 foot ceilings and a state of the art theatre, exercise facility, and pool…the Gates of Mclean caters to the discerning residents of Tysons. The community has one, two, and three bedroom condos of varying sizes from 600 sq ft to over 2,000 sq ft. The condo fees range from $260 monthly to approximately $400 and are considered highly competitive for Tysons Corner.

Lillian Court at Tysons Corner – This closest of condo communities to the Tysons Corner mall is located on the corner International Drive and Tysons Boulevard. Lillian Court offers one, two, and three bedroom condos as well as townhouse style living. Condo fees are low and as one of the more prestigious communities in Tysons many owners have upgraded their units with hardwood flooring and stainless steel appliances. The community offers underground parking for many of the units. Higher level condos at Lillian Court have some of the most coveted views in all of Tysons.

The Rotonda – As the largest condo community in Tysons Corner, The Rotonda boasts 37 acres of walking trails, an underground bowling alley, a salon, indoor pool, onsite community store. The Rotonda is a favorite among senior residents who want to be close to the action. Condo fees are high…but well warranted due to the plethora of community amenities. Apartment rentals as opposed to condo purchases are most popular at The Rotonda because this way the owner pays for those high condo fees and the tenant gets to enjoy those amenities free of charge.

The Encore of Mclean – As the one of the largest and oldest condo communities in Tysons Corner this community boasts a fleet of amenities. Secure, gated, with 24 hour concierge, The Encore has built a reputation in Tysons Corner since the 1970s. Its sister complex, The Regency at Mclean offers the same amenities and is located directly in front of the Encore. Together the Encore and Regency boast over 400 units.

Mclean VA Apartment Communities

Post Tysons Corner – This apartment community is the sister complex to the Fountains at Mclean, however, Post Tysons Corner consists solely of rentals. Located side by side next to the Tysons Corner Mall the Post Tysons Corner complex enjoys the same amenities as the Fountains at Mclean: the clubhouse, pool, tennis courts and fitness facility. Rents at Post Tysons Corner tend to be higher than those from individual owners at the Fountains at Mclean because of high overheads. Typically the rents at Post Tysons Corner are twenty percent higher than comparable condos in the Tysons Corner area.

Avalon Crescent – This higher end community in Tysons is located in between Lillian Court and the Fountains at Mclean. Similarly to Post Tysons Corner, the condos here have much higher rents when compared to the most communities in Tysons. Amenities are plenty and the management is great, however, all of that comes at a much higher price tag.

For more information and current for sale and rental listings for the above communities please visit: http://tysons-corner-va.nvacondos.com/

New Real Estate – The Garage Condo And Storage Condo

There is currently an evolution going on in real estate. In the same way that residential condominiums grew from the traditional apartment, garage condominiums have evolved from the traditional multi-bay rental storage facilities. Storage space can now be an investment.

A garage condo, or storage condo (the terms are synonymous), is your own personal warehouse located on common property. They are quite different from a storage rental because they are a real estate purchase. They are a real estate purchase that will build equity. Just like any other real estate investment, at closing you receive title insurance and a deed.

The garage condo concept is taking off especially quick in metropolitan areas where real estate space is at a premium. A garage condo seems perfect for those who reside in housing developments with tight CC&R regulations, who reside in apartments or residential condos, or who just don’t have space to expand at their current location. Garage condo owners now have a space for their hobbies, projects and even businesses.

While I don’t own a garage condo, nor do I own stock in a condo development, I can’t help but get a little excited about the prospect of these. If you own a business, you can use the space to store records, inventory, stock and so forth. With this, you gain business equity from ownership, and don’t have the costs associated with a rented “storefront.” Internet businesses, especially those that carry and ship inventory, can store inventory and ship directly from, the condo is they desired.

As with a residential condo, a garage condo can be available in many qualities, configurations and prices. Some garage condo facilities offer a clubhouse, swimming pool and other common amenities. Your garage condo can be customized almost any way you want.

I have seen customizations that consist of nothing but simple shelves. I have also seen customizations that include a custom lounge, entertainment center (it’s pretty cool to watch Sunday’s NFL games sitting next to your project car), a wet bar, security systems, hydraulic lifts, custom cabinetry and epoxy floors. In reality, you can pretty much do what you want with it (as long as it falls into your CC&Rs, and doesn’t affect structural integrity). An owner can potentially recoup the costs of these upgrades when they sell.

USA Garage Condo has a pretty informative chart on the benefits of owning a garage condo versus renting a storage unit. The chart is based on a 10 year period. The details are on the website, but the 10 year results boil down to this:

  • Renting: $154,911.77 paid out in rent (you OWN nothing in ten years)
  • Owning: $139,619.54 (you OWE nothing in ten years – and own the real estate, which you can recoup if you sell)

Score another victory for owning over renting. Yes, we all know the benefits, but what most probably did not know was that we now have the option to own when it comes to storage space.

For more information, visit USA Garage Condo, the website for a garage condo development in Tempe, Arizona. This website has further information on investment potential, uses and amenities.