Guide On Investment Property Buyers, Property Managers
Buying A Investment Property in real estate is still one of the best ways to put and grow your money. And the process of looking for an investment property to purchase is a pretty exciting endeavor. But, you should keep in mind that property investing does not always rake in cash. Sometimes it can also result in money losses, especially if you don’t know what you’re doing.
From the start, you should know the best practices to buy an investment property that can give you positive returns. Thus, take heed of these tips when buying your first investment property.
Pick the Ideal Property for Your Budget
Price is king when buying a real estate property. Of course, you don’t want to buy a home that doesn’t provide you with financial gains. Also, you have to choose a property that can increase in value over time. So, these are the factors that you have to consider: buying a valuable property at the right price.
Pricing a real estate property is quite tricky. But this factor is an opportunity for you to buy a house that’s priced below its actual market value. You should know what’s selling in and around a particular market. In this way, you can compare the prices of the properties that were sold and those ones that are currently up for grabs. It can also give you the opportunity to bargain.
Please don’t buy an investment property in an area you know nothing about. Contact a lender that can conduct an independent valuation so that you’ll know the market value of the property that you want to buy. Your goal should always be the positive returns that you can get.
Look for a Trusted Property Manager
You need a licensed property manager to help you manage your investment property. A good property manager should advise you on property laws and your responsibilities and rights as a landlord. He/she should help you look for the right tenants and ensure that the renters pay on time. The property manager should also take care of complaints and maintenance issues.
Calculate Costs and Values
Newbie property investors often make the mistake of miscalculating expenses and expected profits. Getting the numbers right is not something that can be done by your intuition. You should know how to calculate it.
For instance, if you plan to purchase rental houses to renovate, it’s crucial to determine the repairs and carrying costs it will incur. For you to lessen your expenses, go for relatively minor repairs, and be clear with your licensed contractor about the repairs that you want. Get a price quote and then set aside a cost overrun budget in case of a cost increase.
After you’re done with the repairs, you should also consider the expenses that come with owning the property. There are taxes, mortgage, insurance, permits, and utilities that you need to pay. Set aside half of your budget for the renovation expenses and another half for the carrying costs.
You also have to estimate the value of the property after the repairs. One of the common mistakes of new property investors when calculating after-repair value is overestimating it. You can do an internet sleuthing at real estate data sites like Zillow to know the comparable values of renovated properties.
If you plan to use the property for rental, you should get an estimate of the after-repair rental. The process is pretty much the same as getting the after-repair value, only that you’re looking for an estimate of the rent this time.
Get the expected non-mortgage rental expenses. Typically, non-mortgage expenses eat up 50 percent of the rent. This includes property insurance, taxes, maintenance, property management costs, major repair expenses, legal costs, accounting costs, etc.
Understand the Market Dynamics
Consult real estate professionals to know the real estate market where you want to invest. In this way, you’ll understand market dynamics such as demographics, property values, average rents, and real estate developments.
You can also do your research on the internet or speak to locals for that purpose. Moreover, check this dummies guide to investing to make sure you’re on the right track.
Choose the Right Type of Mortgage & Insurance
You can find a lot of ways to finance your investment property. Choosing the ideal type of mortgage that suits your needs can save you a good amount of money. Consult a financial advisor to structure your loan property. You should separate the investment property mortgage from your home loan to lessen your accounting costs and maximize your taxation benefits.
Now you know the tips when buying an investment property. Make sure that you pick the ideal property for your budget and understand the market dynamics before you buy one. It’s also crucial to estimate costs and values, choose the right type of mortgage, and look for a trusted property manager if you already find the property that you want.