Housing prices have continually gone up year after year since the 1990s. The increase in these prices is however not proportional to the increase in incomes of the people who are supposed to purchase the houses. In most economies, incomes stagnate for longer periods than commodity and property prices. This results into median-price housing becoming out of the range of most median-income households. Housing options for many people who make low and moderate incomes are limited. As a result, they are forced to pay a larger share of their income for housing. To further worsen the situation, they can not avoid crowding into shared apartments, single family homes, or townhouses. Others opt for housing in suburbs which are far from their work places. Even worse is the situation whereby a person has no option but to pay a lot to live in a crowded area in exurbia.
Combining these with other factors, the need for low income apartments for rent arises. As an investor(especially first-time property investors), this is a great opportunity make money. Investing in real estate does not necessarily mean that only multi-billion rental or lease property is involved. As simple as it may look, investing in low income apartments for rent is a serious real estate business. It is fruitful and can help an investor to earn a good cash flow. In fact, many prudent real estate investors are involved in low-income housing as it has greater potential to make profit. Below are important tips for investing in low income apartments for rent:
1. Look for areas that have potential for imminent investment: Research on the areas to determine the neighborhoods in which the government and municipals have planned to carry out projects in order to improve the place. Other promising areas are where construction of business centers is underway. In such areas, land values are depressed by the construction works but as soon as those bulldozers are out of the site, land values appreciate. Make sure you acquire a piece of land before the prices start to increase.
2. Look for neighborhood deal breakers: If the neighborhood has higher property crimes than neighboring towns, then don’t dare invest there. If the area is a flood zone or there is something happening that could see the neighborhood’s structure destroyed within a decade or so, that’s a no-go-zone. These deal breakers will help you to evaluate the long-term profitability of your investment.
3. Focus on the most important utilities: Low-income earners and families have the same basic priorities as high-income earners. An apartment that is pleasing to the eye, easily accessible and near relevant amenities like health care centers, schools, shopping centers, recreational facilities and has a solid structure is desired by every tenant. This means that you will have to make sure the plumbing, major renovations, wiring, painting and roofing are well taken care of. Places near roads, schools, shopping centers and hospitals are very profitable as you can charge a higher rent than rental apartments located in the interiors.
4. Make the largest mortgage down payment that you can: The larger the amount of your mortgage you pay upfront, the faster it is for your apartment to make profit for you. When you find a house in an inexpensive area and decide to purchase it, pay as much of the mortgage as you can up front. This will minimize your monthly costs thus increasing your profits.
5. Screen your tenants carefully: Low-income apartments attract low-income people who if not screened properly can be more problematic than middle-income earners. This implies that you have to take time to get criminal background checks, credit checks, employment verification, among other preferences. You can even call the previous landlords they have listed in the contract form to determine whether of not the prospect is really the good citizen they represent themselves as. Getting the wrong tenants can turn your hard-earned investment into a nightmare, but getting the right ones will make you wonder why there are so many negatives about low-income neighborhoods.
6. Biff up security: It is crucial to maximize the safety of your property and tenant, even as you aim at maximizing rental income. Security issues are even more serious in low-income areas and need for adequate measures can not be underestimated. You will have to install items such as CCTV systems, outside lights, sensors and security doors. These deter crime in your property and ensure the safety of the tenants.
There are several benefits of investing in low-income apartments for rent including tax credits and favorable financing options. Young investors should take the advantage of underdeveloped areas as they are a great opportunity to venture into the lucrative real estate business.