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MEET YOUR REALTOR: GABRIEL GALIOTHE
ESTABLISHED SINCE 2006
Gabriel Galiothe has extensive knowledge on Commercial Real Estate with over 13 years in the business. With a degree in Urban Land Development- Real Estate Economics, Gabriel has acquired a special knowledge with the highest and best use for investment properties.
Gabriel specializes in the valuation, investment sales, and 1031 Exchange of apartment buildings and mixed-use properties in Oakland and San Francisco, California.
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Top Considerations to Make Before Buying Your First Investment Property
Real estate can be a lucrative investment, but only if you choose your property wisely — and act strategically. If you fail to develop a strategy or to do your research on a potential property before making a purchase, your goal to profit is doomed before you’ve even begun.
To give your new venture the best chance of success, keep these top considerations in mind, courtesy of Gabriel Gailothe.
Have a Plan
Too many first-time investors buy a home or building with the intention of turning it into an investment property one day. The problem with this approach is that there is no clear end goal and, therefore, no clear path to get from purchase to profit. Before you begin shopping, decide whether you want to fix and flip or buy and hold.
According to CoreVest, the fix-and-flip strategy is a short-term one that often yields high profits, making it a definite winner in many investors’ eyes. With this strategy, you buy a run-down property, fix it up, and sell it for its new market value. Buy-and-hold, on the other hand, is a long-term strategy in which you buy a home, make it livable, and rent it out. Although you don’t get rich quickly with the latter strategy, you have guaranteed cash flow on a continuous basis so long as you keep the home occupied.
Which route you decide to go will dictate everything from how much capital you will need up front to which type of loan you qualify for to where you plan to shop for properties. For these reasons, it’s imperative that you have a strategy in place before you buy.
Look Into Foreclosed Properties
First-time investors love foreclosed properties for a few different reasons. For one, foreclosed homes are anywhere between 18 to 20 percent cheaper than non-foreclosed homes. Two, many lenders give priority to first-time homeowners due to programs such as First Look. Finally, foreclosures can come with the potential for immediate high financial gains.
Of course, there are a few pitfalls to buying a foreclosed home, including the buying process and the often hard-to-meet terms and conditions. For instance, you may have to resolve liens, look for piggyback loans and invest in extensive renovations before you can even qualify for a loan.
Identify Profitable Markets
Where you invest ultimately depends on which strategy you plan to use — the fix-and-flip or the buy-and-hold model. However, there are markets better suited to each. Check out realtor sites to determine which markets are hot, which show potential, and which are on the decline. Dig a little deeper to learn more about the type of people moving into certain markets.
Ideally, you want to invest in strong markets in which the target demographics are well-off or, at the very least, financially stable. If the markets near you are too expensive or show little potential, you can invest long-distance. Just bear in mind that, if you go this route, you will need to consider property management costs when calculating profits.
Consider Hiring a Property Manager
Speaking of property management: If you do go the buy-and-hold route, look into hiring a property manager to help with everything from finding tenants to maintaining the home. Although a property manager will add to your total costs, his or her market knowledge and resources can save you significant time, money, and headache in the long run.
Buying your first investment property can be an exciting yet stressful endeavor. To make it more of the former and less of the latter, keep the above considerations in mind. And if you’re ready to purchase your first investment property, get in touch with experienced Realtor Gabriel Gailothe by calling 510-379-1204 or sending a message via this contact form.