Many people want to invest, but hold themselves back out of fear of the unknown. In our latest post, we have compiled a list of things investors wish they knew before starting out in IL. Knowing these things will give you a solid start on your investment journey!
#1 – Keep Your Emotions in Check
BUying with emotion is something we have all done at one point or another. However, one of the worst times to do this is when you are making investments. Remind yourself that the property in an investment, not a home for yourself. Don’t buy a house out of your budget because you fell in love with the breakfast nook. Successful investing is a numbers game. Know your numbers and stick to them when buying an investment property in Chicago.
#2 – Don’t Wait Around For The Perfect Deal
Yes, you do need to stick to your numbers but don’t expect to find your dream home when buying an investment property in Chicago. Be open to compromise as long as the returns are what they need to be. Let’s say you were aiming to find a four-bedroom home to attract family tenants. However, you just found an amazing 2/2 in a great area. Don’t get so set on what you are looking for, that you miss out on an extremely lucrative deal.
#3 – How To Live For Free
A popular choice for investors, especially when just starting out, is to purchase an owner-occupied property. By using this strategy, you can qualify for a low-rate mortgage just like if you were to buy a single-family home for your use. You can buy a property with up to 4 units, or a large house if you are comfortable having roommates. The rent you receive each month should easily cover the mortgage and monthly maintenance, allowing you to put more cash in the bank.
#4 – Know Your Numbers
Before making an investment in real estate, run your numbers and projections on each property you are thinking about buying. Know these numbers and don’t stray from them. Ask yourself, how much can you pay each month? How much do you need to make? Negotiate to get the numbers you need, and if they aren’t there, the deal isn’t likely right for you.
#5 – Be a Good Landlord
Strive to be the kind of landlord you would want to have. Imagine if your landlord went above and beyond to make sure his tenants were happy? Imploring this technique is likely to get you long-term, high-quality tenants who show respect for the property. Don’t skimp out on repairs and upgrade the house to keep it current with other properties in the area.On the flip side, make sure to fully screen all tenants, even if they come highly recommended. In order for you to be the great landlord, they need to hold up their end of the deal.
#6 – Invest In A Good Neighborhood
Many investors will tell you to never take a chance buying a property in a bad area, even if you have found an excellent deal. Invest in good neighborhoods and you will likely find tenants who will want to stay awhile. With high tenant turnover comes a high vacancy rate, which means you lose money. When buying an investment property in Chicago don’t take a chance in a bad neighborhood. Dealing with repairs, break-ins, and other common problems can be expensive and burdensome.
#7 – Look At Annual Numbers, Not Just Monthly
It great to know what you are spending and making each month on a property, however, it is important to look at the bigger picture. Consider your annual cash flow which will include vacancies, repairs, management costs, and property taxes. The costs on a property go far beyond the mortgage.
#8 – Always Have An Exit Strategy
As with any investment, you should always have an exit strategy in place. What if you don’t see the returns you were expecting? Or what if something happens in your life that requires you to sell quickly? Make sure to have an exit strategy in place so you are blindsided by the need to sell quickly.