There are many advantages to buying an investment property in early spring. From a strictly financial standpoint, winter has some proven numerical advantages. Winter is generally a buyer’s market. However, from a practical standpoint, evaluating and purchasing a home in the winter can be very difficult, particularly in markets like New England, New York, Chicago, and other cold climate regions in the U.S. Here’s why you should start your property search now.
The School Year Impacts the Rental Business
Timing is a key part of your investment property analysis. But rather than beginning with the best time of year to buy a house for investment, let’s first start at the goal- renting that home to generate income. Many renters follow the school year schedule. Schools admit children based on the location of their residence. Moving from one town to another can be tricky with kids enrolled in school. Setting aside the fact that the school bus won’t come for a child in a different town, school districts have residency rules for attendance. Moving to a new rental home is much easier for parents with children when the children are out of school, which ends in June.
Inspections, Repairs, and Renovations
Backing up from our preferred rental period, investors in rental properties should budget at least four to six weeks for renovations. Few new rental properties are ready to list immediately after they are purchased, and almost none that are short sales or foreclosure purchases are ready for immediate occupancy. Once a real estate investor in a rental property has found a property to purchase, closing the deal typically takes six to eight weeks. Foreclosed homes and short sale properties take longer. Do the quick math and a rental property purchased in the months of April or May will be ready for peak moving season in June when school ends and before the school year begins September first. This is always the busiest period for rental apartment seekers.
Snow Way to See Damage
Experienced rental property investors also know that winter is not always the best time of year to buy a house or for choosing a rental property. This is because snow and ice are on the roof, over the septic system, and covering up the grounds and driveway of the investment property. In good weather, some inspectors will use a ladder to closely inspect the roof, chimney, and venting system of a home under consideration for purchase by a rental property investor. None we know of will do so when the roof is covered in ice and snow. This matters for reasons beyond just an accurate price assessment. Banks often require certain systems to pass an inspection before agreeing to a mortgage, and roofs and septic systems are on that list.
Hidden Storm Damage
One key reason that spring is the best time to buy a house as a real estate investment is that it is also an ideal time to inspect a rental property for winter storm damage. Most of the ice and ice dam problems some homes suffer from occur during late winter. If a property has this damage, and it is not yet repaired, a buyer should carefully consider how that damage will be rectified following a sale. Insurance can cover such damage, but the process of inspection, finding a contractor, having the work completed, and payment by the insurance company can take many months. Look closely for any signs of water damage in early spring. A newly painted ceiling and window casings are often a sign of recent water damage. Understanding the underlying cause of that damage, and whether it has been completely resolved is an important consideration.
Another season advantage that points to spring as the best time of year to buy a house is the ability to inspect the basement and perimeter of the property for water. In areas where the water table is high, water often enters basements, particularly in older rental properties. While always a red flag, rental properties with wet basements can be managed with French drains and sump pumps. Spring is typically the wettest time of year, and these systems can best be inspected when in action. Searching for a rental property in spring can reveal how much water enters a rental property and how effectively it is dealt with.
Line Up Your Contractors Now
Finally, on the topic of inspections and repairs, spring is an ideal time to line up contractors. Many have just ended the slower winter season and will be booking outside repairs and renovations for the coming spring, summer, and fall. Contractors need safe access to the investment property in order to cost-effectively work on the repairs and renovations. Spring weather allows them to more easily provide an estimate.
Price and Rental Rate Seasonality
Although there are certainly financial incentives for a rental property seller to accept a lower price in winter, early spring is also a time of the year during which sellers of single-family homes are motivated and willing to discount. Those sellers who listed their homes at the end of the selling season may have been watching with dismay as the property sat listed without viable offers since fall. This pool of properties for sale includes not just private owners. Banks who have been holding a property with no income for many months are itching to sell. Deals are to be found in early spring, for many of the same reasons that rental properties are often discounted in winter.
There is one financial advantage that indicates spring is the best time of year to buy a house. Late spring and summer are when the amount you can rent your house for typically peak. The season effect is due to demand during this period. Your rental unit listings have better results spring through fall. The higher demand boosts rents during this peak period for those making a move.
Peak Rents Jump
Forbes says that leases that originate May through October earn rent that is from $36 to $91 higher per month for a 2-bedroom unit. Over a full year’s lease that adds up to as much as $2,300 in added rental income. This is just by signing during peak rental season starting in late spring. This can change your investment rate of return significantly by boosting your cash on cash return. Every real estate investor knows that positive cash flow is a must, and higher rents are always key to this.
Although winter certainly has its appeal for those investors looking to make a new rental property investment, it also comes with challenges that are hard to ignore in cold-weather regions. Spring has distinct timing advantages tied to the school year cycle. There are also many practical reasons why spring works out to be a great time of the year in which to make a new rental property acquisition.
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