When you’re ready to invest in the Long Beach real estate market for the first time, you’re likely to feel a lot of enthusiasm and energy. Every expert you’ve listened to has likely told you that real estate investments are great ways to build wealth. You’ve heard it described as a passive investment.
It’s true - you can earn a lot of money with real estate, especially when you’re buying rental properties.
But, you have to do it right. A single mistake can set you back and cost you a lot of money.
We love working with novice investors at HCM Property Management, and today we’re putting together a list of the 5 top business tips we have for anyone new to the Long Beach rental real estate market.
Here’s what you need to know.
1. Plan How You’ll Pay for Your Long Beach Investment
Are you planning to pay in cash, which is very popular in the market today, or will you finance your investment property? If you’re a new investor, we don’t expect you have a million dollars laying around to sink into a rental home. You’ll need to find a mortgage and to do that, you’ll need a clear financial picture of where you stand and what might need improving. Many lenders will look for a credit score that reaches 700 at least for investors. You’ll also need at least 20 percent of the purchase price to use as a down payment. There are alternative ways to fund your investment, such as private or hard money loans, but make sure you’re clear on the terms and requirements.2. Find a Great Broker or Bank
When traditional financing is the way you’ll go, it’s important to find a good bank or mortgage broker in Long Beach. Talk to other investment professionals or a local property manager when you need a referral. You can also ask for a recommendation from your Realtor.3. Estimate Income and Expenses Before you Buy
You need to know what you’ll earn in rent and what you can expect to spend on insurance, taxes, maintenance, marketing, and professional services like accounting and property management. Put together a budget before you even buy because you’ll need to know what you’ll earn and lose in both the short term and long term. This impacts your ROI as well as your potential cash flow. Study the market. Talk to experts about how long vacancy periods tend to last and what it costs to turn a property over between tenants. Always over-budget for things like maintenance. Those variable expenses can quickly cost more than you expect.4. Choose Comprehensive Landlord Insurance Policy
Insuring your investment is crucial. A lot of new investors will quickly get a policy that covers liability and the physical home, but they’ll forget about things like loss of rent coverage. Talk to an insurance agent and make sure you’re getting as much coverage as you can. Buy at least $1 million in liability coverage and make sure you re-evaluate your coverage amounts every year as the cost of materials rises and so does your property value.5. Work with a Long Beach Property Manager
The list of professional partners you’ll need to succeed as an investor is long. One of the most important partnerships will be your Long Beach property management team. Begin working with someone early in the process. California has some complex rental laws that you’ll need to comply with. A property manager will protect you and your investment. We’ll also be able to help you estimate your income and expenses and put you in touch with expert vendors and contractors who can help get your property ready for the market.
These five tips are only the beginning of what we can share with you. Whether you’re a novice investor or an experienced investor building a Long Beach real estate portfolio, we’d love to work with you. Please contact us at HCM Property Management.
