The Orange County real estate market has bounced back nicely, interest rates are still at historic lows and the Orange County economy is showing real signs of improvement so why not become a real estate investor? After all real estate is the largest source of wealth in the country and who didn’t love playing Monopoly as a kid? While all that is true, here is some advice we can offer as seasoned real estate investors that will help guide you through the property accumulation process.
1) Are you really ready to be a real estate investor – investing in real estate consumes a lot of two very valuable assets: your time and your money. There is the research you need to do before buying the house and the closing funds you need to provide then once you own the home there is maintenance to take care of, renting, removing and re-renting tenants, taxes, home owners association dues, special assessments, insurance, vacancies, pest control and all sorts of things that will just spring up on you. Make you sure have the funds and resources to handle anything that may arise, and trust me you will be surprised with what will arise.
2) Have a Plan – know exactly what you are buying and why you are buying it. Are you buying a future retirement home that will be rented out until your ready to call it a career? Are you buying a vacation rental that you will also use for needed mini escapes? Are you buying an undervalued property in an undervalued area hoping to capitalize on eventual appreciation? The clearer your plan is up front the better your experience should be. We have had many properties out of the area and one of the best advice I can give you from cost control and management perspective is if you can buy within driving distance of your primary home. No matter how good your out of state property management company is there will always be times when you know you could have handled a situation in a more financially advantages way. It may only be small items but it is the accumulation of small items that really affect your return on investment. Now there are times when you can’t buy close to home (Orange County real estate doesn’t not come cheap after all) or buying close to home does not fit your goals (maybe you dream of retiring to a different state) when that is the case make sure you increase your budget to account for property managers, interview property managers and get referrals from them and add figure everything is going to cost more because your not there doing it yourself.
3) Know the Home – there is a big different between a cosmetic fixer and a handy man special (which often is just a nice way of saying tear down) so know exactly what you are buying by having a full inspection of the property and then estimate the cost to bring it up to rent ability, remember the stove may be functioning but may not be on par with what is in rentals in that area.
4) Know the Location – the old saying always holds true, real estate is all about location, location, location. If you have a great location the home value will rise more, the home will rent quicker and overall you will make more money. Think of location from a three-pronged approach – city (think schools, accessibility, crime data, appeal, etc.), neighborhood within the city, and local within community in that neighborhood (is it an end unit, does it have the largest lot, is it a middle level condo, etc.). All these factors will affect every dime you make on the property from the first tenant till you eventually sell it.
5) Have an Exit Strategy before you Buy – with a firm plan in place and knowing exactly what you are buying and why have your exit strategy in place before closing escrow so you decisions are based on your long term goals. If you buying for appreciation and to sell than know what number you want to get and work with a local realtor who will watch the market for you, let you know when you hit your magic number. We sell a lot of out of area investors Orange County real estate investments and we have put together a hands off program for them where everything is taken care of during the sales process for them and all they have to do is sign papers and cash the check. Honestly the only way we even came up with this program is by being out of area investors ourselves and dealing with problems through the sales process, so if your buying out of area try to find a realtor who has also been an out of area investor, they will have a much better understanding of your pain in the process. If your buying as assets to leave to your heirs than do all the paperwork needed before you close escrow so nothing is left to chance or forgotten. If your buying as a retirement home know ahead of time how much your going to have to pay on top of your mortgage to pay it off before you retire. Having a firm exit strategy will help guide you to make the decisions that are in the best interests of your long term goal and maximize your return.
So are you ready jump two both feet into the investment property waters? If you are ready to become a real estate investor than remember the closer the investment home is to your home the more you can control costs and properly manage the property. However since there are a lot of appealing areas outside of Orange County for real estate investing just make sure you thoroughly research the area and find a great realtor with experience with out of area investors to work with (and preferably one who has also been an out of area investor themselves). Despite the appealing prices outside of Orange County there are still plenty of properties right here that make fantastic investments depending on your investment strategy, feel free to contact me to discuss some local options you may be surprised by how well you can do investing in Orange County real estate.
949 599 6860