Useful Tips On Buying Your First Rental Property
The ROI (Return On Investment) for a good investment property can fluctuate somewhere between 3% and 10% annually. If you own several objects for more than a year and manage them effectively, then you might get a bigger ROI, becoming a professional in the area, and even creating a property management company in the near future. But that’s doable if that’s your thing. While some experts say that running a commercial estate is a passive income, it actually requires a lot of active actions, and not everyone fully understands them and can cope with them.
Buying rental property: what you should consider first
Any strategy for real estate investing for beginners requires you to make the full calculation of cash flows given your financial situation: how much money do you have, whether you take a bank loan to finance your purchase, and what your credit score is.
Unlike a house for a family living, where one might do just 3% of the down payment to buy it, a commercial property will likely require from 15% to 20% of the first installment (depending on your credit score – 720 and above are likely to result in 15%). Do you have such an installment?
You shall find a good place to buy. For newcomers to the market, experts advise not to buy the best or worst options, aiming at the middle – for the sake of optimal price/condition ratio. Surely, the best option would require less maintenance but will devour a larger initial budget. The low-cost option in a bad condition will demand good hands to fix everything up as well as might require many costs to make everything to the good living condition.
Also, if you are a small owner of the first property management, then you shall have good skills in fixing things – from burst piping that destroy the floors to a non-functioning electric outlet or broken furniture. Surely, you can hire someone to do all the maintenance but that’ll devour a share of your profit. According to surveys, owners of 1-2 objects of commercial real estate tend to do all the maintenance with their own hands. Can you do that?
The financial cushion. If you’re taking a bank loan to buy a commercial property, then you shall have a financial cushion for at least 3-6 months of bank payment if your cash flows won’t be enough sometimes to cover the payment. When a steady inflow of money is reached, you shall take 30%-40% of it to form a bigger cushion. A part of that will go to unforeseen events like a roof torn off by a hurricane or a tree fall.
Calculating your margins is the right way of how to start investing in real estate. Don’t think that if you let some apartment for $1,000 a month, this all will be left to you – it is expected to spend from $300 to $700 to operating expenses, insurance, taxes, unexpected costs, and a financial cushion. If you’re financed by a bank, then the sum may spur up to $900-$1300 a month, so you might get a negative cash flow, at least, at the beginning. Actually, having a 4%-6% annual ROI for a beginner is quite good. So, the investments of $100,000 will recoup in 20 years.
Think about the things that come along with the investments in real estate
Renting a house to tenants is a thing that will make you meet various people – good quiet payers and those who will break things down and flush their glossy magazines down the toilet. Are you ready to deal with all types of people, sometimes consuming a lot of your nerves due to quarrels and forming evictions? Also, you will have to know all rules and legislation about renting and leasing in your country and area – including rights and obligations of parties – so as to avoid legal issues and secure yourself.
Inflation and appreciation
Depending on your area, real estate prices go up differently, doubling the cost of real estate each 7-15 years. So, in 30 years of your ownership, the cost of your property can double from 2 to 4 times. Even if you sell it with a discount due to amortization and the real cost of money will be lower due to inflation, you’ll still benefit from 1x to 3x times to the initial cost of your purchase (before taxes) on top of its cost. With 20 years of average recoupment and even 2x addition to the resulting cost after the sale, your $100,000 will turn into around $450,000 in 30 years. If you’re thinking of that long-term investment, operating commercial real estate may be your thing.
Oct 5, 2021
Careful tracking of incomes & expenses is what every financially diligent person has to do in their life. Not only this is about the correct definition of cash flows they have but also about taxes correctness & calculation of real available resources to plan their life & further business process. Why & how to track expenses?When you track rental income, you stay organized, which is crucial for ...
Oct 2, 2021
Kyiv real estate market is strong in 2021. The same strong, as expected, it will enter 2022. As the lockdown waves show, Kyiv doesn’t follow trends of the most influential economies of the world – when another lockdown happens, the prices for square meters here grow, not fall. Even with many idle periods for the past 15 years of annual publically available statistics for the capital’s real esta...
Sep 26, 2021
A wise investor knows that diversification of a portfolio is able to cover possible fluctuations of assets in one basket. While this strategy is widely applicable throughout the world, it is not as straightforward in Ukraine, where various types of investment opportunities as of 2021 create not a similar income but very different. Investment property and other investment opportunities analysis ...
More about DGY
DGY is a real estate investment and property management company. Our experts have an impressive experience in turning businessmen into smart real estate investors. We collect limitless opportunities throughout the world’s best real estate markets and help our clients implement the best deals. We take care of all due diligence and customize documentation while your income grows. We also provide you with property management services so you can forget about the tiresome maintenance of several objects and entrust this process to professionals.
Investment advice and recommendations
DGY is an investment company that takes care of every client and helps them become successful investors. With the help of an investment experience and a well-thought plan, we will help you examine the market, choose a strategy specifically for you or your business, and calculate future costs to start making money with real estate investment.
In order to invest in real estate, you should consider how you will run your management in Ukraine. DGY will help you eliminate all possible pitfalls at an early stage as a personal project manager will be assigned to your case. They will assist you in choosing the project according to all required objectives.
DGY Investments takes care not only of purchasing property but also renovating an existing one. With the help of a thorough plan and estimating, we will thoroughly prepare a property for sale. Our professionals evaluate an investment property and create a strategy that includes the costs for renovation, possible taxes, fluctuations on the market, etc. Therefore, our clients are able to resell the renovated properties in Ukraine with more than 15-20% profit from the initial price.
Before our clients decide to deal with real estate investing, they consult with our experts concerning details such as the necessary documents needed to purchase a property and successfully run all the processes connected to it.
Therefore, if you are eager to invest in Ukraine, it’s essential to have all the paperwork done correctly, and that’s the moment when our team of experts takes care of this step. DGY Investments helps investors buy real estate property, manage the paperwork, start preparing relevant documents for purchasing realty in Ukraine, and close the deal successfully.
Real estate investment opportunities in Ukraine
When an investor decides to invest in real estate in Ukraine, the most affordable way to attain stable passive income is through buying residential real estate. Investors can expect to receive a regular monthly payment from their tenants at a fixed monthly amount, unaffected by inflation or other unforeseen circumstances. The amount of rental income will vary depending on the size, type of property and location. For example, buying an apartment in Ukraine’s capital Kyiv is beneficial to investors due to offering a large working population, central location and affordable prices. Hence, the minimum price of renting a decent one-bedroom apartment in Shevchenkivskyi District will be around $1000 per month in 2021, followed by Pecherskyi District with a cost of $850 per month. Besides, investing in real estate in Ukraine annually brings clever investors up to 15% of yield, attracting many business people every year.
Properties for investments in Ukraine
Ukraine has a giant sector for real estate investing. Businessmen who come there all over the world often choose between investing in residential and commercial properties. The main advantage of buying property in Ukraine is the affordability of prices on the houses and apartments. For instance, if you invest in real estate in a historical district, a luxurious apartment will cost you around $80k only.
How to invest in Ukrainian Real Estate
In order to invest in Ukrainian real estate, you should take into account a list of crucial factors. The first one is to choose what kind of realty you are going to invest in: residential or commercial. It is vital as it should comply with Ukrainian real estate law. The second tip is to identify the purpose of purchase in order to make a strategy for the property. For instance, you may purchase the property for your own use or buy it for lease. The next step is to calculate the taxes and what kinds of taxes are payable during the purchase, owning, or selling. Also, to invest in real estate properly, you should keep in mind currency control rules in Ukraine to sell a property and get a higher profit.