Purchasing an investment property, or turning a home into an investment property, can feel like a daunting process. The first concern most people have is “how will I afford it?” Remodels, upgrades, and repairs can get pricey – and quickly. Plus, it’s really important to have an idea of what kind of income you could generate from the home; once you’ve done everything you needed to do.
Areas that have a high amount of jobs or are popular tourist destinations, like Los Angeles, are going to usually have a higher market value for rent. Make a decision early, of what your goals are for the property.
Say your home is in Los Angeles…
Do you want to turn it into an AirBnB? If so, consider the cost of furnishings and the little touches to make your home more desirable. What are the main draws to the property as a vacation spot, and what can you do to emphasize the desirable qualities? Maybe the bathroom is large, but the space isn’t being used as best it can. Making a shower more modern, or putting in a more dynamic sink, are little ways to attract people to your home – but it can also be a pricy venture. Plus, if you do not live near the property, you are going to want to have a “team” in place to help manage your business… such as a reliable housekeeper, a handy repairman, and even a property manager if it’s necessary. In Los Angeles, many people want to feel like they are getting 5 star service and put a lot of weight into amenities available, so it’s important to keep that in mind for your home.
Do you want to make it a full time renter? If so, you should consider all the factors that people consider when it comes to renting a home. If the carpet needs to be replaced, if it could use a fresh coat of paint, and if the appliances could use an upgrade. In Los Angeles, you should also keep in mind the type of renter you want in the home. If you want a family, consider how much space the home can hold, and how much your home can facilitate a family. Do the closets need to be a little larger, with more shelving? Could hard wood floors be a better option, than carpet which is prone to heavy wear? Also, it is important to understand your competition. In Los Angeles, one of the biggest competitors you will have in the rental market will be high rise apartments. Often times, they will have a list of amenities like pools, gyms, brand new appliances, and chic modern layouts. However, not everybody wants to live in a high rise – so it is important to heighten the aspects in your home where high rise apartments often fall short. This can be more space, a yard or a porch, or even a larger kitchen. If you already have the new appliances, a chic layout, and a clean space – it is easier to one-up your competitors if you invest in the things that your competitors cannot beat you on.
Whatever your direction is in – financing is an important role to be able to fully take advantage of what the market has to offer. If you are not able to finance the upgrades or remodels out of your pocket, utilizing the equity you have in your home may be an option. At Independent Home Finance, we offer an array of products designed to help you meet your goals for your investment property. You’ll want to create a budget for your project, with all your plans listed and the estimated costs. For larger repairs, getting a quote from a contractor is a very important step. Once you have the number you need, then you can discuss with your loan officer to see what option is going to be the best, to get you the cash you need to finance the project.
With some loans, it is possible to build in monthly payments through the loan – such as private equity/hard money loans. These loans offer temporary financing, while you remodel or upgrade the home, and once you have everything completed – we can help you start the process of looking into securing permanent financing for your long term goals. During the loan term, we also may have the option to build in a fixed time period of monthly payments. Using part of the cash out from the equity, we may be able to structure it so that your first few months are already prepaid in advance. This can be very beneficial for individuals who know there will be a loss in cash flow while the property is undergoing work, before they can get renters in.
Overall, as long as you have a good team working with you – from your contractors, to property managers, to your loan officer – you will be setting yourself up for better success, as you undertake this new step in your financial journey. So, if you have a goal in mind for your investment property, feel free to reach out to us today… Hopefully we can earn your trust, to be on your team.