When you’re preparing to invest in Long Beach rental homes, you’ll need a financial plan that examines where you are, what you expect to earn, and what you’ll need to spend. A good plan will compare your available funds with the anticipated cost of acquiring and owning a real estate asset. A good financial plan will help you minimize risk and set your investment goals.
Every sound financial plan starts with a budget. Your budget will provide the information you need concerning the property’s income and expenditures. You need to know what you can spend before you go out looking for that perfect investment property.
What Can You Spend on a Long Beach Investment?
When you decide to finance an investment property, you’ll have your income, assets, debts, and liabilities scrutinized by your bank or lender. Make sure you know what your gross and net salaries are. This will inform how much you can borrow and you can’t invest in real estate without leveraging a bit of debt. What you can borrow to buy an investment property will depend on:- Your documented annual income
- Your general monthly expenses
- The type of loan you are looking to take
- The current interest rates
- Repayment terms
- Expected down payment
Budgeting for Long Beach Rental Costs
Owning rental property comes with costs that go beyond the home itself. You’ll have to factor in your mortgage payment, insurance costs, and taxes, but you’ll also have to plan for things like maintenance. There are likely to be costs associated with getting the property ready for the rental market. Maybe there will be simple cosmetic upgrades that are needed but you might also need a new roof or updated plumbing. Maybe the appliances are old or the landscaping is a mess. Set some money aside for getting the rental property ready for the market. There’s also the risk of vacancy. You’ll want to have some funds available to cover those months that the property isn’t occupied. If you’re working with a Long Beach property management company, you’ll have management fees to consider. There may be legal fees required for evictions or disputes throughout a tenancy. Marketing will cost money when you’re looking for a tenant. Don’t underestimate what you’ll have to spend to keep the property safe, habitable, and occupied.Review and Adjust Your Budget as Necessary
The market is going to change and you’ll need to be prepared for that. Your real estate investment is going to change too. It might age and deteriorate quickly or perhaps you’ll make some renovations that increase its rental value. Continue looking at your budget. If you find you are always surprised by seasonal maintenance costs, for example, start saving more for those times of year.
Remember that property is a long-term investment and as you build up equity, you are actually earning more with your property than you realize.
If you’d like some help budgeting for a Long Beach investment property, we’re the experts to work with you. Contact our team at HCM Property Management.
