In 2020, COVID-19 upended the world. Arkansans hunkered down, spending more time at their houses and apartments than ever before. During their near-endless Zoom calls, many experienced the now all-too-familiar home fatigue. Add in low mortgage rates and the rise of remote work, and a full-blown house-buying frenzy ensued.
Over the last year, home prices have risen 20% as mortgage rates steadily ticked up. Despite these perceived obstacles, real estate experts agree that opportunities exist to enter the market, particularly as investors. But there are five factors to consider before closing a deal:
- Begin with the acquisition price: It seems simple enough but determining the right purchase price is a step often overlooked by inexperienced investors. If someone pays too much on the front end, they immediately diminish their potential profit margins.
- Estimate the repairs: Many investment properties require at least a little work. Individuals should calculate their expected renovation budget and add a comfortable buffer for hidden surprises.
- Calculate the after-rehab value: What will the property be worth after renovations? Investors can project the after-rehab value by looking at similarly sized homes in the area, commonly known as comps.
- Predict the rent: If individuals plan to buy and hold properties, they should research the neighborhood to see the current rental rates. They should also evaluate factors that may affect future prices, such as amenities or developments.
- Don’t be afraid to ask for help: Real estate investing isn’t for the faint of heart. Licensed professionals who specialize in and have experience securing these types of properties can lend a hand.
A lot goes into deciding whether to purchase a property. In today’s tight housing market, it’s essential not to be too quick on the draw. Investors should do their research, whether by themselves or with an expert’s help, to ensure the best profit possible.
Amber Wood is a partner, vice president of sales and agent with Mid South Realty, a Little Rock-based real estate brokerage specializing in investment properties. For more information, visit midsouthar.com.