Real estate is one of the fastest growing investment sectors in Dallas today. With booming industry in the Dallas/Fort Worth area, the rental market is in high demand, and there are numerous investment opportunities for individuals and investment groups to see great returns on income properties. However, before you dive in, read these six factors to keep in mind before investing in an income property in Dallas.
1. Know Your Budget
First and foremost, the key to operating at an acceptable risk level is to only invest money that you are willing to lose. With the incredible growth rate in the real estate sector in Dallas, you are far more likely to win than lose, but every investment you ever make will come with the risk of loss. A savvy investor will always operate within an acceptable risk level.
2. Have an Exit Strategy
Next, a savvy investor will have a contingency plan in case the investment goes sour. For investors flipping houses, they will usually choose to fix and hold a property rather than flip it immediately, or they may sell to a real estate wholesaler to minimize loss and move on to the next investment. Whatever style of investment you are considering, you should first work out your exit strategies to ensure that you will be able to continue to grow your wealth, even if the income property you are investing in right now is a failure.
3. Quality Property Management Is Key
If you are purchasing investment properties to increase your passive income, you will more than likely be buying rental real estate. If this is the case, you will not want to act as landlord for these properties. For group and trust investments this is not even an option, but even for individual investments it is not the best idea. Simply put, attempting to DIY your property management responsibilities is a huge time sink and will not garner you the profits you want.
For that reason, it is absolutely essential to find a good property management firm to handle your real estate marketing, tenant acquisition, maintenance, repairs, bookkeeping, etc. Finding a good property management firm to take care of all of this for you will ensure that you get more out of your income properties.
4. Know the Market Where You’re Investing
Of course, if you are not well acquainted with the real estate market where you’re purchasing your income property, it may not matter whether you have a decent property management firm on your side or not. Understanding and gaining familiarity with the market where you’re purchasing property is of the utmost importance when choosing investment real estate. If you perform your due diligence and research the market’s activity over the past four, six, twelve, and eighteen months, you will get a good idea of its current trends, its history, and what it is most likely to do in the next few years and months.
5. Look for Catalysts in the Area
Understanding the movement of the market isn’t the only factor in getting to know the area where you’re making your purchase, though. You should also familiarize yourself with the physical layout of the area and what’s going on there. Look for signs and catalysts of growth, including new schools, grocery stores, parks, and other attractive amenities. These are all signs that your area is in a growth cycle and will continue to show a favorable market in the future.
6. Don’t Buy for Appreciation
Finally, when you choose your income property, do not buy it for its appreciation potential. This should only be a secondary concern, as it is not guaranteed. Instead, buy your property based on its current value and its immediate earning potential, and you’ll get a lot more of your investment.
Consider these six factors to keep in mind before investing in an income property in Dallas, and you will have the tools you need to make the best decision for your portfolio.