SOURCE: Windermere

Whether your dream home just came onto the market or you’re thinking ahead for a purchase down the road, coming up with the money for a down payment can feel daunting. Don’t fret! There are steps you can take now—both large and small—that will add up over time to help you secure the funds you need to make that offer.

Determine how much you need

First things first, set your goal. The answers to these questions will help you determine what you’ll need to budget for the down payment:

• What do homes cost in the area you where want to live?
• How soon are you looking to buy?
• Do you qualify for buyer-assistance programs in your area? Where have interest rates been going (up or down) lately?

Don’t forget about closing costs when calculating how much you’ll need!

Start a high-yield savings account

It’s difficult to keep track of how much you’re saving if you’re putting all your money in the same account you pay for living expenses with. Your down payment fund deserves its own savings account.

Look for high-yield savings account options at your current bank or find a new bank that offers one. Many banks today offer a 3-5% annual yield that will compound quickly.

Eliminate unnecessary expenses

No, you don’t need to stop eating avocado toast or give up your hobbies. Even simple changes can quickly add up.

• Go thrifting instead of buying new clothes.
• Get your library card rather than buying new books.
• Cancel subscriptions to publications or services you rarely use.
• Prepare meals at home a few times a week instead of dining out.

Though cutting back can sometimes feel like an inconvenience, these adjustments are temporary and don’t have to change how you live too drastically. Even while you’re re-prioritizing your spending, you can still simultaneously save for things like travel, and all the provisional adjustments will feel worth it when you’re enjoying your new home.

Don’t dip into emergency funds

Though it can be tempting to look at your retirement account balances or emergency savings account and daydream about barbeques in your new back yard, don’t give in. The tax implications of cashing out a 401K or IRA almost always outweigh the benefits of the quick money, and many retirement accounts require paying them back relatively quickly, likely before you’ll have built equity in your home. And your emergency fund is there for just that: emergencies. Life can be unpredictable and having at least six months’ living expenses stored away offers peace of mind is priceless.

Automate your savings

If you haven’t already, arrange to have your paycheck automatically deposited into your bank account, and then designate a percentage of it to go directly into savings rather than checking. This helps ensure that you’re putting the cash away before you use it on other expenses. By depositing directly into your savings account you’re less likely to think about it when making a purchase.

Other ways to automate savings include taking advantage of programs that will round up any purchases you make from checking and put the difference directly into your savings account. Check to see if your bank offers this or look into available applications in your app store. You can also use a credit card that offers cash back on a percentage of what you spend and save those rewards in your separate savings account. Just be sure to pay the bill completely each month!

Take advantage of windfalls

If you get a raise, bonus, or inheritance, put the extra money right into your high-yield savings account and stick to the budget you had before the windfall. You won’t feel a difference in your lifestyle, but even an incremental increase will help chip away at your goal.

Ask for help

Weddings, graduations, new babies, and other major life events are great opportunities to ask for cash in lieu of gifts. Be sure to document any gifts appropriately, and as long as it is a gift and not a loan, money from family and friends can help put you in a home you’ll all be able to enjoy together soon.

Buying a home is likely to be the largest financial transaction you’ll make in your life, and saving enough for a down payment can feel overwhelming. But with some dedication and smart money choices, you could be ready sooner than you think. Good luck, and happy saving!

SOURCE: Windermere

SOURCE: Windermere

Congratulations on your new investment property! Now comes the exciting part: Turning your property into a revenue-generating machine. While it’s not exactly easy, your goals are within reach if you take steps to organize, plan, and build a solid foundation. Here are some ways to help maximize your property’s potential in the short and long term while avoiding future headaches.

Ensure your property is up to code

At a minimum, your new investment property should be safe and livable. This isn’t just the right thing to do, it will also shield you from liability and help attract better tenants. Start by repairing the necessities using your home inspection report as your guide. Prioritize issues that could lead to bigger problems down the road, such as a leaky roof or holes in the closet that could lead to infestations. Ensure that all appliances are in top working condition, including the furnace or other heating system, and that the plumbing and electrical are up to code.

Also make sure the property complies with all local and state laws regarding the presence of mold, lead paint, asbestos, and other potentially hazardous substances.

Choose a property management team

While you can manage the property yourself, hiring a good property management team will reduce stress and likely save money over time. Property managers handle tasks such as rent collection, maintenance, tenant screening, and marketing your property. They also oversee complaints, so you don’t have to deal with upset or difficult tenants.

To find a reliable property management team, start by asking for recommendations from friends, family, or other real estate investors. Also check reviews on specialized property review sites. When interviewing potential managers, ensure they have experience with properties like yours and assess their responsiveness and communication skills, as you need a manager who keeps you informed and addresses issues promptly.

If the management fee is too steep and you decide to go it alone, curate a list of reliable plumbers, electricians, appliance repair companies, and handymen to handle maintenance requests. Also thoroughly screen tenants to ensure they’re reliable and will take good care of your property.

Enhance the property appeal

Before you rent the property, consider cost-effective renovations to enhance its appeal and rental value without breaking the bank. For the kitchen, consider refacing or repainting cabinets, upgrading to energy-efficient appliances, and installing modern faucets and light fixtures. Bathroom options include updating faucets, showerheads, and flooring. Other improvements that may attract higher-paying tenants include refinishing the floors, upgrading to energy-efficient doors and windows, and hiring a gardener to improve the landscaping.

Consider different rental strategies

Regular maintenance is crucial to maintain the property’s value and prevent costly repairs. Coordinate with your tenants to schedule periodic maintenance checks, and create a list of maintenance tasks to address when tenants are on vacation or between renters.

Property owners have traditionally concentrated on long-term rentals. However, the rise of short-term rental platforms like Airbnb and VRBO have shifted the landscape for some. Long-term rentals are idea for owners seeking a stable income, as turnover is typically low and monthly revenue is predictable. On the other hand, short-term rentals can command higher nightly rates, but they usually involve more expensive and time-consuming management and upkeep. Plus, reservations can be unpredictable, particularly in areas with seasonal fluctuations.

Set competitive rental rates

Property management teams generally recommend an optimal rent based on a comprehensive market analysis, helping you achieve the highest return on your investment. If you’re managing the property yourself, you can perform your own analysis by researching comparable properties (“comps”) on websites like Craigslist or Trulia. Consider factors such as your property’s location compared to the comps, and whether your property includes coveted features like air conditioning, a washer/dryer, or ample outdoor space. Proximity to good schools and local amenities such as restaurants are also valued by renters.

Keep in mind that for your investment to be profitable, your rental income must cover expenses such as mortgage payments, taxes, management fees, insurance, and ongoing maintenance costs. Make sure to periodically review and adjust the rates to remain competitive and maximize your income.

Market your property effectively

As with rental rates, your property management team typically lists and markets the property, so you’re off the hook here. However, if you’re managing solo, you need to think like a product marketer, using tools like high-quality photos, virtual tours, and compelling descriptions to make your property stand out. First impressions matter, so lead with a well-lit, inviting photo. Bright images convey a clean, move-in-ready home, while dark photos can scare tenants away by making the property appear dirty and uninviting. Consider hiring a professional photographer to ensure the lighting and framing are perfect in every room.

Review other listings to gather inspiration for your own. Highlight unique selling points over standard features, especially if the latter are evident in the photos. Think about what would attract you as a renter. Is it simply a garage with two storage cabinets? Or is it a spacious garage with a shop-ready layout, including two 220V circuits, two sturdy workbenches, and built-in storage?

Master the legal and financial details

Owning an investment property comes with legal rights and responsibilities for both you and your tenants. It’s crucial to familiarize yourself with local rental laws, zoning regulations, and tenant rights to prevent legal liabilities and handle any issues that may arise effectively. Additionally, obtaining landlord insurance is essential to protect against potential property damage and liability.

And remember, owning an investment property lets you take advantage of tax deductions for mortgage interest, property taxes, repairs, and depreciation. Keep detailed records of all income and expenses to ensure you maximize these deductions and continue to earn a profit.

SOURCE: Windermere