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, this fact is valuable so you can make smart decisions when it comes to buying an investment property. Houses that need upgrading or significant repairs located in hot locations may be wise investments. Whether you want to purchase a house to renovate it and sell it at a higher price or buy a multiunit complex for rentals, these are valid and acceptable reasons why you should be motivated to invest in a real estate property. There are several things you need to consider before buying a property investment.
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. You have to remember that income varies in a real estate property because tenants comes and go, and it may take some time renting out a vacated unit, most especially if it requires rehabilitation or repairs. Unless agreed to be paid by the tenant, it is your responsibility to pay the bills, mortgage, insurance, and property taxes, so you have 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. There are risks associated with real estate properties requiring large-scale improvements, unless if you know a company or someone who can provide quality work at bargain prices, otherwise you may end up spending too much on costly repairs. You have to look for properties that only need modest repairs which are priced at below-market rates.
For first-timers in the field of real estate, experts highly recommend starting small, such as 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. You may consider enlisting co-investors if you cannot afford to buy a property on your own, but you have to make sure you are not just comfortable doing business with your partners, but also have a clear agreement in managing your investment.