Thinking of Investing in Property? Start Here First
More affordable home prices and lower interest rates have led to more and more people considering an investment in property. While this is a tried and true way to build wealth, you shouldn’t mistake it for a get-rich-quick scheme. Investing is an art form, and almost everybody has to start small and get a feel for the market. Where do you begin? The best way is to simply find a realtor you can trust, look for a good deal in a strong location, and make an offer to the bank that reflect the value of the property. But of course, buying your first investment property is much more complicated, nerve-wracking, and exciting than that. If you’re thinking of investing in property, here are some tips to get you started.
1. Focus on Location
There is truly no way to underestimate the importance of location, especially for rental properties. Most tenants will give up a few amenities to live in a better location, or else they’ll be willing to shell out more money for rent to live in a great area. A good location is about more than the crime rate. It’s also about the proximity to schools, malls, parks, and public transportation, as well as other things that typically attract renters. You can also research the job opportunities near the property by finding out its proximity to new construction and future business development. Be on the lookout for an area with a sudden influx of vacancies, which can mean it has made a turn for the worse. Good investors know how to tell the difference between a neighborhood on the way up and one that’s on the way down.
2. Understand Your Financing Options
Many people find that coming up with the down payment on their investment property is the biggest hurdle to getting started as an investor. While most experts recommend saving up for at least 20 percent, you can find a good deal on a property with a 10 percent down payment, and there are even loans that offer 100 percent financing for investors with good enough credit. You should begin working on your credit long before you start looking for houses, as well as gather up your account statements and pay stubs. Lenders can also ask for divorce papers, copies of your business license, and tax returns. If you have all the necessary requirements, it’s possible you can be pre-approved for an investment loan, which can be a great advantage when you negotiate the purchase of a property.
3. Estimate Your Future Cash Flow
Investing in real estate can simply be a question of good math. But comparing how much rent you can bring it versus how much the mortgage payment will be is only half the battle. It costs money to own a house, and as the landlord, you will be responsible for the upkeep. You will need cash on hand for gardening, landscaping, and repairs and you’ll also need to be prepared for times when you’re between tenants. Having a prime location will help you keep more consistent tenants, but there will always be times when the property isn’t rented out. That’s why investment is such a gamble for most people, especially their first time out.
Investing in rental property won’t make you a fortune overnight, but it is a smart way to invest in your future. Choose a property suited to your status as a beginning investor and then familiarize yourself with the market. You’ll learn a lot about your own abilities and how to play the odds, and soon buying real estate won’t seem like such a risky bet at all.