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Investing in residential homes can diversify your investment portfolio

On behalf of Steven Waldinger

Investing in residential real estate can provide a rate of return that is significantly better than many fixed income investment alternatives.

Some New Yorkers seeking to diversity their investment portfolios will look to the housing market as a possible source for profits. Forbes magazine observes that it is not quite as easy to flip homes quickly for a profit in light of the fact that the housing market is stabilizing and home price increases are slowing. Consequently, it is advised that those with money to invest in the housing market may want to think about buying rental housing to hold on to for the long-term.

If one is looking to buy single-family homes as a long-term investment, the key is to invest in an area with strong job growth in order to have an abundant number of potential tenants who are looking for housing. Conversations Magazine has noted that investing in real estate can often provide a return that is significantly better than many fixed income investment alternatives. So long as investment properties are being leased, they will produce reliable and steady income for investors.

In searching for homes to buy for investment purposes, location is key according to the Bankrate website. Homes located in highly populated areas are best since they produce a larger pool of renters than homes located in rural areas. One should look for homes located in areas that have a low crime rate and good schools since renters tend to gravitate to those neighborhoods. Homes located near public transportation, grocery stores and restaurants are optimal since proximity to amenities is a good selling point when it comes to renting.

Potential problems

The Simple Dollar website observes that becoming a residential landlord is not for the faint of heart. There are two problems in particular that would-be investors should recognize. First, renters can sometimes do tremendous damage to a home. Indeed, some can trash a home in a remarkably short amount of time. The only way to protect yourself is to regularly and frequently visit your properties.

Second, recognize that repairs will often be unexpected and expensive. While no landlord relishes the thought of receiving a late-night call about a furnace that just gave up the ghost, dealing with repairs comes with the territory when you own rental housing. Since some repairs could end up costing you thousands of dollars, prudent investors should have an emergency fund on hand so they do not have to dip into personal savings should the need arise to install a new furnace or air conditioner.

The website suggests that those interested in investing in residential homes need to assemble an informal team of experts to assist them. Team members would range from an experienced insurance agent to maintenance individuals who can handle the inevitable repair issues. In addition, investors will want to include a real estate attorney as part of their team. The attorney can assist them with the closing and make sure that purchase contracts are properly worded and include the right contingencies. Those who become landlords will find that an attorney can render valuable assistance in situations where tenants fail to pay rent or trash an investment property.

Seek legal advice

If you have decided to invest in residential homes, you should seek the advice of a New York attorney experienced in handling real estate matters. The attorney will help you with the closing and assist you in dealing with any tenant problems that may subsequently arise.

Keywords: residential homes, investment portfolio, potential problems.