Even experienced investors can feel the stress and anxiety that comes with acquiring a new property. There are so many essential details and a variety of personalities you’re working with. It often seems like anything can go wrong at any part of the process.
Let’s not forget about the risk that’s also inherent in real estate investments. Even the most confident investors among us are a little bit worried from time to time that maybe they’re making a mistake with a particular property or a specific financing arrangement. Nothing is entirely predictable, and you have to be willing to put every plan in place and then hope for the best.
We’ve written before about how to get started as a new investor, and hopefully, you’ve prepared yourself well for the experience.
Now – let’s talk about buying that first Baltimore investment property, and how you can ensure you have a less stressful experience.
You can avoid the stress and the general fish-out-of-water feeling by preparing yourself as much as possible.
The other thing that helps, of course, is surrounding yourself with professional partners who understand the Baltimore market and the property management industry.
Make a Plan for Your First Baltimore Investment Property
You’ve heard us say this before, and more than once: investment goals must be established. They must be understood. They must be aligned with every investment decision you make.
Once you’re ready to buy something, it’s tempting to jump right in and buy the first property that presents itself. This is exciting. This is eventful. You want to get started right away.
That enthusiasm will serve you well, but make sure you’re buying the right property and in the right way. Things will get very stressful very quickly if you rush into an offer or a purchase agreement. Avoid the potential backpedaling you may have to do and take things slow.
That may seem counterintuitive – especially in a competitive market like this one. You’re probably being told by everyone to move quickly. To avoid missing that great deal.
Yes, you have to move quickly. But you also have to be smart. Avoid the stress of bad decisions or mistakes that were made because of rushing.
Before you even begin looking for that perfect investment property, you need to have an established set of consistent goals and expectations. Without investment goals, you may find yourself losing money and making a lot of missteps. Profit and success will arrive when you’re able to make strategic decisions that fit the profile of your ideal investment property.
Not sure how to establish those ever-important investment goals? Here’s an idea: think of your investment goals as a business plan. Create a one-minute elevator speech that defines why you’re investing. Are you interested in short-term cash flow or long-term appreciation? That answer will help you decide which neighborhoods will work best for you and what type of property you want to focus on acquiring.
Investment goals should be clear, concise, and attainable. Write them out and review them frequently to make sure you’re on the right track.
With those goals established, you’re ready to buy your first investment property.
Educate Yourself on the Baltimore Sales and Rental Markets
The market in Baltimore is stressful, and that applies to both the sales market and the rental market. We’re trying to help you reduce the stress of first purchase, but the simple fact is: this is a competitive market. It’s a fairly expensive market. If you want to invest in real estate without anxiety and frustration, you have to understand its trends and its particulars.
Not everything can be predicted or planned, but there are certain trends and cycles that show investors’ patterns. Those patterns can help you make better investment choices.
Don’t follow the statistics and the stories on national real estate trends. These are interesting nuggets of information, but you have to be laser-focused on the local market and what it means for you. Baltimore is unique.
Educate yourself on the real estate market so you’ll understand the inventory and what you’ll have to spend. Educate yourself on the rental market too, so you’ll know what kind of rental value to expect and how much you’ll likely spend on things like maintenance, vacancy, and tenant placement. Study neighborhoods and shifting demographics. Figure out what you’ll need to spend to get the property that fits your investment goals. Knowing how the market works will help you decide what to buy and when.
Where can you get this information? We suggest you try:
- Networking with fellow real estate investors.
- Joining professional organizations that can put you in touch with information and resources.
- Professional Baltimore property managers and real estate professionals.
- Newsletters, podcasts, and websites.
- Social media groups.
If you’re already well-educated on how the Baltimore real estate market operates, you’ll find that purchasing your first property is far less stressful than if you have no idea what to expect in terms of pricing, property management, and negotiations.
Be Conservative When it Comes to Budgets
You’ll have less stress buying your first investment if you over-budget.
We don’t know your personal financial situation, but we can almost guarantee that investing in your first Baltimore rental property will likely be more expensive than you expect. Your experience will be much better if you have a health reserve or some savings. Don’t spend every dollar on the acquisition.
Most investors plan for expenses like vacancy costs, unexpected repair costs, and the costs associated with marketing your home, preparing it for the rental market, and finding good tenants. You have to budget for professional services like Baltimore property management, accounting help, commissions, broker fees, taxes, insurance, and the list goes on.
Set up a maintenance reserve for any emergency repairs, and make sure you have enough money to cover the lack of rent that comes with vacancy. Always purchase a property that’s nearly rent-ready. This will ensure you’re not spending a lot of money on renovations or delaying the rental income you can earn.
You can’t effectively budget without knowing what you’ll earn. When you’ve identified the ideal first purchase, make sure you have a clear understanding of what you’ll need to buy it. You also want to know how much rent you’ll earn and what you can expect to spend on maintenance, fees, HOA costs, and other variables. Who will shovel the snow in the winter and mow the grass in the summer? These costs may seem minor, but they’re part of your budgeting process.
Avoid the stress of surprise bills.
Making the Offer: Know Your Numbers and Do the Math
The financial part of buying investment property is especially stressful.
- How will you pay?
- What do you need to put down in cash?
- How much should you leverage?
- What’s a good interest rate?
A lot of investors pay in cash, but interest rates are so low right now, leveraging your investment with a loan is a good idea. A large down payment isn’t required in the Baltimore market necessarily, but if you’re buying your first property, you’ll likely have to have some cash up front. Once you begin to grow your portfolio, you can add more assets by leveraging what you already own.
You’ll need to have some solid financials that demonstrate what you expect to earn and what you’ll likely spend. Understanding your numbers is the only way you can determine whether a potential property will earn the money you need it to earn.
Focus on the rental value and the expenses. Some of those expenses will be fixed. You know what your mortgage payment is going to be every month, for example. Other expenses will be variable, such as maintenance on the property and vacancy costs. The more prepared you are financially, the less stress you’ll feel during the process.
One thing that may calm you down is the simple fact that rental properties are low-risk investments. If the stock market and other investments make you nervous, you’ll be happy to know that the returns on your real estate will be fairly steady. Stock values can fall or disappear but real estate is a tangible investment and it isn’t going anywhere.
Work with Professional Baltimore Property Management Professionals
The best way to reduce and even avoid stress during the process of investing is to work with Baltimore property managers. A good property management company will understand the rental market and its demands. You’ll have some idea of what kind of repairs and upgrades might be necessary to get the home rented. You’ll know what vacancy rates tend to average and whether you can expect high tenant turnover.
Don’t buy an investment property without talking to a property manager. If you’re not sure where to turn as a new investor, contact us at Stripe Management. We work with owners, investors, and properties in Upper Marlboro, Prince George’s County, Washington, D.C., Capitol Heights, District Heights, Baltimore, and anywhere in the DC metro area.