Things to Consider When Buying Investment Property
As you have probably noticed, the housing market in the United States has been hindered by too few houses being chased by too many buyers, thus the choices for potential buyers are limited, and it also increase the prices, resulting in bidding battles in hotter markets. As a real estate investor, you must be aware of this kind of valuable information, to help you make smart decisions when it comes to buying an investment property. Homes needing significant upgrading and significant repairs but are located in or locations may be wise investments. It doesn’t matter regardless you want to buy a house to sell it in the future for higher profits, or a multi-unit complex for rentals, these are valid and acceptable reasons why you shouldn’t be hesitant to invest in a real estate property. It is also important to be aware of the most important things you have to consider when investing in a real estate property.
It is essential to be prepared to put down a big down payment because mortgage insurance is not available for real estate investment properties, and a twenty percent down payment is required in order to get traditional financing. Before the rent checks start coming, you have to also prepare to spend on unexpected repairs, especially if you’re opting for landlord services. It is important to choose the location of the property, to study the feasibility of success, and remember that your profit may differ because tenants comes and go, and it may take some time renting out a vacated unit, most especially if it requires major repairs or renovation. Unless indicated in the contract that your tenant will be responsible for these expenses, it is your responsibility to pay the utility bills, mortgage, insurance and property taxes, and it is important to set aside a portion of your profit for these important matters. Bear in mind that property taxes highly depends on the property type and how long it has been kept, so it’s crucial to consider property taxes when investing in a real estate property, because if the previous homestead exemption that has been applied, you may discover a big increase in property taxes. If you are just new in real estate investing, beware of the risks related to buying real estate properties with very poor condition, requiring large-scale improvements, unless if you know someone who can provide quality work at bargain prices, otherwise you may just end up spending too much on unworthy costly repairs. You have to look for properties that only need modest repairs which are priced at below-market rates.
It is best to start small most especially if it’s your first time investing in real estate, so you can start buying a single apartment, duplex or condo, to help you learn the process of investing in real estate, and then decide if you are willing to handle a larger scale if you are able to handle small ones smoothly. You may consider enlisting co-investors if you cannot afford to buy a property on your own, but you have to make sure you’re comfortable doing business, with a clear agreement in managing your investment.