Real estate investing is a popular vehicle for growing and sustaining wealth among many Americans, including Virginians. The housing market is constantly changing, and staying updated with real estate laws and trends is vital to success. Whether you prefer to buy property and sell it for a profit or rent out properties as a source of recurring income, knowledge of Virginia’s laws concerning real estate investing is beneficial before making any major decisions.
Types of Real Estate Investments
Before you get started, it’s important to have an understanding of the various real estate investment pathways and the laws and technicalities specific to each.
Property Flipping
Flipping is a technique that real estate investors use to make profits by buying, renovating, and selling houses. The primary goal for strategy is to buy low and sell high. This means you need to find properties that are undervalued and in need of repair. However, flipping isn’t for everyone. If you don’t like working with contractors or aren’t good at making decisions on the fly, then house flipping might not be suitable for you.
The flip side of that coin is that you’re good at making quick decisions and have a knack for DIY projects. Then this could be an excellent way to make money from real estate investing. So what does it take to get started with house flipping? First, you need a solid plan before looking for houses to buy.
The 70% Rule
You need to know about the 70% rule to make profits while house flipping. It states that you shouldn’t spend more than 70% of the cost of a property on renovations or repairs. You should aim to spend around 30% on upgrades and repairs. This will allow you to sell your property at a healthy profit.
Rental Properties
The classic rental property is one of, if not the most popular real estate investment. This model can be achieved by purchasing an apartment, condominium, duplex, triplex, or single-family home and renting it out to individuals, couples, or families for leases generally lasting around 1-year, which can then be renewed.
The benefit of the rental property is that the income generated from it is predictable and stable. This allows you to factor in the rental income, property taxes, mortgage payments, and unexpected expenses to create a solid income-generating asset that usually requires little work to maintain.
Tenants Rights
Tenants have rights under federal and state landlord-tenant laws. This means that if you violate a tenant’s rights, they can occasionally sue you for damages or withhold rent. As a result, you need to know what those rights are and how to uphold them while running your business.
Short-Term Rentals
Another common real estate investment in Virginia is short-term rentals, also known as vacation rentals. These can be single-family homes or apartments that are rented out for a period that is generally between 2-14 days. For instance, in Virginia Beach, as tourism is a sizeable part of the economy, many people list their properties on Airbnb or Vrbo to take advantage of the seasonal influx of tourists.
Short-term rentals require more work than long-term rentals because the property needs to be aesthetically or geographically attractive to garner attention. Not only is this investment lucrative when done correctly, but it is also risky due to the regulations involved with short-term rentals. For instance, there may be limits on the duration you can rent the property and the type of guests allowed to stay there. These laws and regulations vary from state to state.
Market Research
Another mistake many investors make when purchasing houses for short-term rentals is failing to research the property before buying. Since tourists will be the main crowd that you are trying to attract, proximity to main attractions and sightseeing spots in your city will allow you to charge the best prices and garner the most bookings.
Tips for New Real Estate Investors
In the excitement of making your first real estate investment, it’s easy to overlook crucial steps or potential issues that can derail or heavily impact the viability of your investment.
Picking a Location
Location is everything, and in real estate, it’s more vital. Suppose you’re interested in real estate investing in Virginia; you need to find a location that will offer you a good return on your investment based on your goal.
Cost of Repairs
This mistake has ruined many real estate investors. They underestimate how much work needs to be done on their fixer-upper before they can sell it at a profit or list it for short or long-term rent. Don’t just look at what needs fixing right now. Also, consider things like leaks or electrical problems that could crop up later – especially in case they go unnoticed. For instance, drywall damage caused by water damage that can lead to mold growth. Ensuring you have enough money for unanticipated costs will save you in the long run.
Support Networks
Having an experienced team on your side is essential to aid you in navigating the real estate process. This will ensure everything goes smoothly. You’ll need an attorney, a reliable contractor, and a real estate agent who is competent in their fields.
Taxes and Fees
In some areas of the country, it’s common for utility companies to charge higher rates for commercial properties than residential ones. If you’re buying an apartment building or office complex, you need to know the costs of heating and cooling a property, which can vary drastically depending on the type of units used.
Utility costs can eat your profits quickly if they aren’t factored into the equation when doing your calculations. It is also important to know the property taxes you will pay yearly. For instance, the real estate tax rate in Richmond, Virginia, is 1.20%. That means that for every $100,000 of home value, you’ll pay about $1200 in taxes.
Start Your Real Estate Investment Journey
Real estate investing is a rewarding decision you can make to set yourself up for financial stability and success. However, with so many details to consider and so much information to consume, it can take time to figure out where to start.
That’s where Hutchison & Co comes in to help find your next property in Newport News, Williamsburg, or another location in coastal Virginia. We are an experienced real estate team who has helped many clients to find their dream homes in Virginia. If you are considering buying or selling a home, we would love to hear from you. Contact us today for a consultation to see how we can help you achieve your goals.
