The year 2020 changed the Louisiana Real Estate market. We all saw ups and downs in every sector, real estate in Louisiana being one of them. Many real estate investors and soon-to-be homeowners are wary of placing their hard-earned money in the market in 2021, but you may want to take another look.
You may be wondering if you should invest in Louisiana real estate this year. It can be a tough decision with everything going on in the economy and in the news. Historically, property values have gone up over time. Real estate grows in value even during economic turmoil or market uncertainty. Home prices may rise and fall periodically, but there are always great opportunities if you know where to look.
While you can almost always count on Louisiana real estate increasing in value over time, you still have to be cautious as you can lose money in the short term if you aren’t careful. You can weather the ups and downs of Louisiana’s real estate market if you buy and hold properties long term. Just take a look at the value of any home during a 10-year period and it will almost always go up in value.
There are multiple ways to invest in real estate, but we will focus our attention on one of the less risky forms of investments such as buying single family rental properties.
It takes a great deal of research to find your first rental property, but it gets easier with practice. You want to find a property that can bring rental income that surpasses your mortgage, insurance, taxes and other miscellaneous expenses. It can help to speak with a real estate agent that has experience with investment properties as they have a large network of clients and will know the area better than most.
When choosing your first rental property, you will want to do a fair amount of research before pulling the trigger. You want to choose a property that will go up in value over time and will have a steady flow of renters. Check the local real estate market to ensure rental homes are rented out and not vacant. Going a few months without a renter can destroy your profit margin and may be hard to sell if you decide to back out.
College towns in Louisiana are a great place to invest because there is always a need for quality housing. You may end up going through a number of renters if your rental property is close to a college, but you will at least be able to fill your rentals with no problem or down time.
Are There Any Risks Associated with Buying Rental Properties?
Absolutely. There is no single investment strategy that is perfect and without risk. While investing in rental properties in Louisiana may be substantially safer than some investments, it does come with a certain amount of risk. However, you can plan for issues ahead of time and budget for them. Here’s a few common risks that rental property investors have encountered in Louisiana:
- Vacant rental properties
- Damage from tenants
- Hurricane or storm damage
- Rising property taxes
- HOA fees
No matter how much you plan, you will likely have a few months of vacancies while you find and screen new tenants. It can take time to find good renters that can pass your background checks and afford the rent. You may find yourself with a property that stays vacant a few months out of the year. This can be devastating if you are depending on the income. Be sure to budget for this occasional loss of income.
Unfortunately, renters have been known to damage rental units either by accident or on purpose. You have to have a budget to make repairs or your tenants will leave or even sue you if the repairs are necessary and you don’t complete them timely. It helps to have a handyman on standby for small repairs.
Hurricane or Storm Damage
Louisiana experiences its fair share of Hurricanes and large storms. This is a yearly event and your rental properties are at risk of receiving damage. Depending on which insurance company insures your rental, your hurricane deductible may be 2% or 5% of the value of your home. This means you will have to come out of pocket for the deductible in order to have your rental unit repaired. If you don’t repair quickly, your tenants may request to be let out of their lease and you will have to find new renters.
Rising Property Taxes
There isn’t anything you can do about taxes, so you have to budget for it. Property taxes will likely only get higher, so you will have to purchase rental units that can garner higher rent to offset rising taxes.
Home Owner’s Association fees can range from small to astronomical depending on where you live. Speak with your tax professional to see about deducting HOA fees for your taxes.
Your rental unit may be new and shiny when you purchase it, but you will have to do some upgrades to the property eventually. This can range from replacing the carpet to painting the living room. It’s a good idea to do periodic upgrades so they don’t accumulate at the same time. You could spend an entire year’s worth of income if don’t plan properly. It’s a good idea to establish a relationship with a company that can help you with rental property upgrades and give you a discount for repeat business.
Regular upkeep and maintenance of your rental units comes with the territory. You may have units that never need much maintenance and others require a handyman weekly. It’s a good idea to research properties before purchasing to determine how much maintenance they will require. You may want to spend some time learning about home repair so you will know what to expect.
Overall, investing in real estate in Louisiana can be extremely profitable if you know what you’re doing. You can implement various strategies to maximize your profit and potential. Get in the real estate game as soon as you can and start learning as much as you can. There are plenty of resources to learn from and you can take real estate investing classes to increase your knowledge. If you feel lost, feel free to contact your local real estate agent as they will be happy to point you in the right direction.
The best advice you can get regarding rental property investing is to start planning and jump in as soon as you can. You can’t realize gains until you buy your first property.