Real estate has created many of the world's wealthiest people, so there are numerous reasons to think it is an excellent investment. However, as with any investment, it is better to do your research and know what you're doing before spending your money.
Once you have your finances sorted, the next important question is how to buy an outstanding investment property. The first thing to do is to look for an experienced realtor, such as First Look Realty, who can guide you and show you various properties that fit your plans and budget. Here are the most critical steps to take when purchasing your first investment property.
As a new investor purchasing their first investment property, you should not carry your debts as your investment portfolio. It is imperative that you clear all of your debts, medical bills, student loans, and so on before starting a new chapter in real estate.
Contingent on the clients you're targeting, you need to do careful research before purchasing your first investment property. Ensure that the house is in a location that will appeal to the type of clients you want to rent to and return the investment. Investment is not about emotions — it's about economics.
Investment properties usually require a larger downpayment than, for instance, owner-occupied places. You'll likely need at least 20 percent in downpayment, considering that mortgage insurance is not available on such properties.
Start by calculating the money that you already have and what you can secure before purchasing the property. Then, calculate how much it would cost to buy and renovate the house if it needs work, and add in the operation costs. Finally, determine the price you will list your property for or the rent you're expecting to get, and an approximate evaluation of the profit you have the chance to win.
Once you buy, the most important thing you should do is to maintain the investment property. This includes keeping the common areas in good condition and ensuring the tenants have a place to throw their garbage. Disinfecting and fixing plumbing issues should also be an essential task, as no one would want to live in an unclean rental with constant issues. Hiring a property manager is a way to solve the maintenance problem if you do not want to deal with it or live far away. You can also add value to the property by making various improvements; however, it should make financial sense.
With real estate investing, you attempt two things involved in the holy grail of investing: cash flow and capital appreciation. Real estate investing — like equity investing — also allows you to take a multiple strategy approach. Moreover, you have complete control of your results with this type of investing, as it is a sustainable enterprise model.
A possible disadvantage of real estate investing can be illiquid investing. This means that when you put down your money, you are taking a long-term approach. If you have an emergency, there are only a few levers you can draw to get your equity out of the property. Real estate investing also requires plenty of property maintenance and a learning curve. You're not going to get every investment right; things can go south, and that's normal. It's all about placing yourself in the best possible position to minimize the risks.
No matter what type of investment property you are buying, investing in real estate asks for a good amount of cash, making it essential to take additional measures to secure a profit or at least save yourself from a massive loss. You also need to do thorough research before venturing into the industry and keep learning.
Are you looking to buy your first investment property? First Look Realty can help you with advice on the properties that match your plans, how to make the purchase, required paperwork, and all the other steps you need to take to get your first investment property.