Finding an investment property doesn’t have to be stressful!
There are so many things to look for when buying an investment property, from curb appeal and the condition of the home to property taxes and insurance. Before getting yourself into such a large financial obligation, here are some things to consider so you do not get in over your head.
1. Down Payment
You are going to need to have the extra cash necessary for the down payment on the property. Since mortgage insurance is not available for rental properties you are going to need to cough up at least 20 percent or even more if you want better rates.
2. Fixer Upper
A lot of real estate investors get excited about flipping houses. Little do they know, it usually ends up taking more time and money than they had budgeted and anticipated. When looking at fixer upper properties, be careful not to sign up for something you cannot handle especially if it is your first investment property. Also, ensure you budget for renovations and do not take on something where you are going to pay too much for renovate. Find a happy medium and purchase something that only needs minor renovations if it is your first investment property.
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3. Location
Location is going to have a direct effect on how many potential renters you are going to get a when. The better the location, the higher the demand. Find a home in a decent school district, an easy commute to the downtown area, and a low crime area. This way, the location of the property will draw potential renters to the home.
4. Property Taxes
One of the most important things is to look for a property with low property taxes. You do not want any surprises when it comes to this, because even though you are collecting rent you are still in charge of paying the mortgage, property taxes and insurance. An increase in property taxes could have a negative effect on your profits.
5. Interest Rates
A negative that comes with purchasing a rental property is that the interest rates are higher on investment properties compared to regular mortgage interest rates. Make sure that you are collecting enough rent from your tenant to make a monthly profit.
6. Landlord
Something major to consider is if you want this to be your full-time job, aka if you want to be the one to receive the phone call at 2 in the morning that there is something wrong with the plumbing. If you do not want to have to deal with the little things and have enough cash to spare to hire someone, you should look into a property manager. This way, you are not on call 24/7 and you have someone that will take care of the maintenance side of things.
Taking all of these things into consideration prior to buying an investment property will help you receive a significant return on your investment.
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