As is the case with most major cities, the real estate market in Houston can be daunting at times. For the beginner, the proposition is even scarier, but for a seasoned pro like Al Hartman things tend to even out somewhat over time.
Today we are going to tap into Hartman’s knowledge of the Houston real estate photo. Again, his experience of this sector is almost unparalleled and through the course of this guide we will take a look at the main issues you should be looking out for as your look to buy your first properties in the area.
Be wary of the fixer-upper
Perhaps one of the most tempting things for the budding real estate investor is to turn to a fixer-upper. In short, this is a property that might not necessarily cost much initially, but requires a lot of work to get it up to standard so it is available to rent.
The obvious upside here is that you can make significant amounts of money on the building as you make the necessary renovations. However, we are going to advise you exercise caution in this regard. It takes a massive leap of faith to commit to one of these properties, for the simple reason that so much can go wrong. You don’t have the experience to know how much things really cost to renovate, and this can throw your numbers all over the place.
Instead, if you are a beginner, start small. After gaining experience, you can then proceed to buy a riskier property like this.
It’s location, location, location
Particularly in Houston, Location is paramount. While it might be desirable in some ways to have a property right in the heart of the city, from an investment perspective you should question this.
As we all know, the best areas for schools in Houston tend to be in rural areas. As we also all know, the highest demand for properties tends to be in these good school areas.
Of course, it’s not all about schooling and you have to consider other neighborhood issues such as the jobs market and even the local amenities on offer.
Make sure you get your return numbers right
One of the primary mistakes for the new investor is not getting their initial return numbers correct. It’s very common to completely underestimate your expenses and from then on, things can go downhill quickly.
Contrary to popular belief, you’re not going to be left with just one expense in the form of the mortgage repayment. You are going to have real estate management fees, insurance, repairs and tax. All of these are going to eat into your bottom line and if you are already tight, this could actually result in you making a loss.
Some sources suggest that you should forecast your expenses to be around 50% of the income. However, our advice is to work out things specifically for your property and not leave this to guesswork.
