If you want to invest in Detroit real estate, one of the best options would be to invest in a single-family home. But how do you know when you have found the right one? We can help you find the right Detroit house using the 10 questions below!
Question 1: What are your long and short-term goals for the property?
People invest in Detroit real estate with very different goals in mind. As such, it is important that you are investing in properties that get you to where you want to be. Do you want to make 40k in the first year? If so, and if you can handle some hard work, flipping might be a better choice than a rental property. However, if you are looking for a long-term, stable source of income, the rental property might be the way to go.
Question 2: How much can you really afford?
Buying a house is more than simply coming up with the down payment and the monthly mortgage payment. There are numerous other costs that come into play when you own a Detroit house. Before making any property investment, make sure you understand what it will entail. Utilities, monthly maintenance costs, property taxes, and insurance costs all might be a bit different than what you are used to.
Question 3: Will this be your primary residence or an investment property?
Or maybe both? One strategy new investors use is to purchase a home for their own needs, with the intent of renting it out in a couple years. Other investors might choose to purchase a multi-family property using an FHA loan. As long as there are four units or less, you can live in the property while making a profit from the rent amounts others are pay.
Question 4: How will you pay for the house?
Many investors buy houses in cash. Getting a loan for an investment property usually isn’t very easy. This is why many investors choose to start with a small property, slowly working their way up to larger and more expensive properties. Another option would be to work with a partner on the deal. This will allow you to invest in a more expensive property than you would have been able to on your own.
Question 5: How much do you need to borrow?
Once you know how much the house will really cost you each month, you can also factor in the upgrade and repair costs. There are some loans that will allow you to include repairs into the amount you are borrowing. If you are taking out a loan, make sure you have discussed your plans with an accountant or financial planner to ensure you can really afford what you are trying to do. For many people, buying a house in cash can be a safer route.
Question 6: Who will your tenants be?
Do you want to purchase a buy to rent property in the Detroit area? This can be an excellent way to create income and build equity. Think about where you are buying and what kind of tenants are actively looking for rentals. Many investors won’t waste their time on a property in a bad neighborhood, even if they are getting a great deal. Always keep in mind who would want to rent your house. Even if you aren’t renting it out right now, you might change your mind down the road.
Question 7: What would your cap-rate look like?
Defining your cap-rate is critical in real estate investment. Determining this number will help you determine if an investment is actually lucrative. To calculate your cap-rate, you simply take the net operating income and divide by the purchase price. The higher your cap rate, the better the profits, however, this often comes with additional risk. There are many other things to consider other than cap-rate, however, using this to compare properties can be tremendously helpful when investing in a single-family home in Detroit.
Question 8: What is the neighborhood like?
Most investors will stay away from bad neighbors, even if they find a great deal. Unless you are certain you are buying in an up and coming area, a bad neighborhood is simply too risky. You will likely not attract the high-quality, long-term tenants you are looking for. You will also have to worry about vacancies, low rents, and theft.
Question 9: What are your must-haves and have-nots?
When buying an property, you should write out the things you must have, would like, and absolutly can’t have. Stand strong and stick to your list. You don’t want to compromise on things that are important to you. Making this list will help you buy with less emotion.
Question 10: Will it likely resell easily?
With every investment, you need to have a good strategy. Will you be able to liquidate the property quickly if need be? If there comes a time when you need to sell, you don’t want to find yourself stuck with an unwanted property.
Are you ready to buy a single-family house in Detroit? Whether you are looking for an investment or a full-time residence, call us before calling an agent! Find out how buying direct can save you money! Send us a message!