Buying an Investment Property: Tips You Should Know
Buying an investment property is a bit different than buying a home for yourself. When you have the intention of making money from the property, you need to look at it with a different mindset and a different budget, among other things. While property investment is something that just about anyone can do, it’s not something you should jump into without accumulating some knowledge first.
That’s why it’s important to do some research before you get started. In this article, we’ve accumulated some of the most helpful tips for getting into property investing to help you get in your feet. If you’re a veteran property investor, you might just find something new here, too.
Adequate preparation is an enormous part of navigating the investment property market successfully. You can’t just buy an investment property on a whim. You need to know the area the property is located in, what it will cost to renovate or update the property, if necessary, and what level of rent you can ask for that piece of real estate, among other things. If you don’t know these things before making your purchase, your chances of making a profit decrease significantly.
Besides researching the area the property is located in, you should also look at prices, permits that you might need, demographics in the area, including the average income level, and the kinds of renovation styles that residents in the area tend to prefer. Of course, there are hundreds of more variables we could add to this list of things to research, but it would be too long for this article. The above are some of the most important things to consider.
Invest in Single-Family Homes
The simplest way to start your investment in real estate is to purchase single-family type homes. The upkeep is easier than commercial and multifamily properties. Not to mention, there will be less wear-and-tear and minimal maintenance with a single tenant.
Since property investment is, well, an investment, you always need to treat your money carefully. Your emotions, for example, must not come into play when you’re making your investment decisions. No matter how cute a house is, it may not be a sound investment. Your only consideration should be whether the property can make you a profit or not, and the transition to this mindset can be difficult.
Not to mention, rental property buyers should only purchase a unit that cash flows. The best way to reduce the risk and increase your income success is to ensure that you are putting a high deposit down. This will help your investment stay cash flow positive, even from the very beginning.
Avoid The Fixer-Uppers
It might be tempting to choose a property that you can get at a bargain and flip it yourself. However, this may not be the best idea if you’re working on your first property. Unless you’re a skilled contractor or knows one who does a quality job at a cheap rate – you’re more likely to overspend on your renovation. Instead, buy a home that is priced below the market with minor, yet affordable repairs.
Look for Outdoor Space
A large number of prospective renters are always on the lookout for units with enough space to enjoy and entertain when necessary. In most cases, tenants aren’t picky about the type of outdoor space available, but still, want it to be usable and private. When possible, choose a property space that will allow potential tenants the freedom to add their personal touch on it with plants, decoration, and outdoor furniture.
Aim for Accessibility
Pick a location that meets your ideal tenant. The area should be close to public transit and amenities for single-family units, while rental properties are ideal locations for students looking to rent long-term. Buy a place and design the unit to cater to the typical renter you plan to target. Knowing your ideal tenant will help guide you through the process of property investment.
Additionally, the way you handle your money is different from a buy-to-let property. Ideally, you should have a rough idea of all the expenses involved with a property before you ever put an offer in on it. For example, if a property needs renovations before it can be rented out, that needs to be factored into the budget for that property.
Sent in by Karoline Gore
Featured photo courtesy of Mashvisor
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