Whether you are considering buying a multiunit complex for an instant rental, purchasing a home now with the thought of selling it in a couple of years or profiting from the investment of a fixer-upper which may be resold at a higher price, here is what you should look for as you consider real estate as an investment:
Prepare for a substantial down payment
Non-availability of mortgage insurance for an investment property means you need to make a 20% down payment to obtain traditional financing. Plus, putting even more money down may result in a better rate. In addition, loan costs generally are greater for investment properties.
Enjoy fixing things and being handy
Choosing the landlord route will bring with it a lot of challenges, which includes making repairs. Make certain that you have sufficient savings available to deal with any unexpected repairs within the short term – before your rent checks begin to roll in.
Tenants will come and go, and it might take some time to rent a just-vacated unit out – particularly if it needs significant rehabbing or repairs, decreasing your income. However, you still will need to pay the bills, which includes insurance, property taxes, and mortgage.
Depending upon the kind of rental property invested in and how long it’s kept, investors might have to encounter a substantial rise in property taxes. This is due to a homestead exemption that is placed by the previous owners.
Beware of any fixer-uppers
If you are new to buying real estate, beware of taking on a larger challenge than you’re able to handle. Unless you possess the skills for a large-scale improvement – or you know somebody who performs high-quality work at discount prices – you will probably pay too much to rehab the home and still earn a profit on its sale. A better choice includes looking for homes that require modest repairs which are priced at below-market rates.
While repairs will present a challenge, so will purchasing a bigger property than you are prepared to handle. Beginning small – buying a duplex, condo, or single family home, for instance – may assist you in getting grounded in the thought of buying real estate and deciding whether it really is the proper step for you.
Wisely select your partners
If you cannot afford to purchase property by yourself and want to enlist co-investors, make certain that you are at ease not just with your business partner, yet the agreement struck up to manage and purchase your investment.
For more important tips when considering purchasing an investment property contact the well-known property management services of Pyramis Company today!