Buying investment properties is a great way that you can supplement, and someday maybe even replace, the income from your day job. Regardless of whatever investment property strategies that you use, you will want to find a property that gives you a good return on your investment and that most likely will also be able to be rented out to either tenants or vacationers. More people have gotten rich through real estate than any other means, and as long as you have a long-term mindset, there’s never been a better time to get into the property market. To help you out, here are few tips on how to buy investment property.
First, Look for the Right Market
The first thing that you’ll have to do when you’re going to buy investment properties is to find the right market. You can use anything from beachfront property to condos on college campuses for rental properties, so what you use is up to you. Real estate is primarily a local affair, so depending on where you want to have you investment property, you can have drastically different markets and sales climates. The more important things that you should look for in good investment properties are:
• Economic and Population Growth
• Faster Moving Market: Homes in the area should be on the market for six to twelve months or less.
• No signs of vacant lots and properties
• An attractive local area that draws people in
• Closeness to your own place of residence
While there are other aspects that you can look at to find the right local market, these are the most important.
Then, Find the Right Property
After you’ve found the right market, you need to find the right properties to invest in. The most important part of this is the pure numbers. Investment properties should not be a impulse purchase in the same way that houses are and you need to be very careful about how you spend your money. Odds are you won’t find someone else that’s a bigger sucker than you are to take your place if you pay too much!
In particular, you need to look at the expected cash flow and ROI of the property. If you can’t figure this out on your own, have a real estate agent that specializes in investment property help you out. The volatility of the rent will also be different depending on if you get a beach investment property for vacationers or you get one that you plan on renting to longer term tenants. Make sure you know the risks involved with both types of properties.
The condition of the property itself is also, of course, a major concern. Before you buy a property always have an inspector or contractor come to check out the condition of the property and any possible repairs you might have to make. The age of the house is important as well, as this will be a good indicator of how many repairs you might have to make in the near future.
Taking all this into account, you should be buying an investment property that allows you to pay for any immediate repairs as well as the mortgage payments, insurance, taxes, and routine maintenance assuming a five percent vacancy rate. You should also have money left over that allows you to pay for any emergency repairs if they should pop up.
The Right Loan is Important As Well
Another very important part of buying an investment property is finding the right loan. Since you’ll likely by paying the property off over a period of 20 to 30 years, interest will become a major expense. Getting a much lower interest rate can really improve your ROI over the time that you own the property, so you need to be comparing loan offers from multiple sources. The easiest way to do this is use an online broker, which brings together several different lenders to compete for your business. You can get started with them using the form below to see what type of mortgages you might qualify for.
Don’t Forget the Paperwork
Finally, buying investment properties will also involve at least a little bit of legal paperwork, whether it is finalizing the deed or writing up rental agreements. Make sure that you have a good lawyer to look over the papers so that there are no loopholes and you protect yourself in the case of a lawsuit or other legal problems.
Buying investment properties is a great way that you can slowly but steadily increase your total wealth and supplement, and eventually replace, the money that you get from your day job. There are numerous property investment strategies, but the most important part is making sure that you choose the right property and that you get the right loan. Follow these simple tips and you will be well on your way.