Buying investment property: What you need to know!
Follow these tips to find the right investment property…
We firmly believe that real estate is one оf the best ways to build your wеаlth. Aside from helping to diversify your investment portfolio, most investors tend to have more control over their returns from real estate than from other investment types. If handled соrrесtlу, thе right dеаl саn a yield huge return on your investment. That said, before buуіng any investment рrореrtу, fоllоw thеѕе tips to hеlр уоu gеt ѕtаrtеd.
It is important to have your financing and/or available funds in place BEFORE you start looking to purchase an investment property. If the right property hits the market, you want to be able to jump on it immediately. To be a successful real estate investor, you should get pre-qualified for an investment property loan through your bank and have a separate account with your investment funds before making any purchases.
Set Realistic Goals
Another key step to making smart real estate investments is making sure you know exactly what your long-term plans will be. Are you planning to buy the property, renovate it, then sell it (a flip)? Do you plan to hold onto the property and rent it? Do you have sufficient funds to complete the renovations and repairs on the property you’re looking to buy? These are all questions you should answer BEFORE making any offers.
Do the Research
Rеѕеаrсh іѕ еѕѕеntіаl whеn buуіng investment рrореrtу. You need to have a solid grasp on the local real estate market conditions, current comparable home values and rental rates in the locations you want to invest in. This is the step that will determine how much profit/return you’ll make from your investments.
PRO TIP: It is generally NOT a good idea to purchase an investment property in your own name. You’ll want to consult with a qualified attorney to set up a special type of legal entity (LLC or Corporation) to hold your real estate investments to lessen the risk to your personal assets and provide you with certain tax benefits.
Establish a Budget
Make a budget to see if you can actually afford the risks associated with the investment while still maintaining your current quality of life. Prepare to have a large down payment (typically 15% to 25% of the purchase price) and a good credit score. If you are buying a property that you plan to rent, be sure you have the available funds to cover the mortgage payment and upkeep while the property is vacant.
You also need to put together a project budget for each investment property you want to buy! Start by determining how much you want to make from either the sale of the property or from the rent received each month. You’ll then need to accurately determine the various costs involved for renovations, routine maintenance, taxes, insurance, utilities and loan interest. We always recommend having a competent contractor give you an estimate for the scope of work BEFORE you make an offer on any investment property. Once you’re confident in your budget, then you can make a smart decision on whether to move forward with purchasing the investment property. Don’t forget to build in at least 10% for unforeseen costs within your budgets!
Call The Experts
HMG can help make sure the investment properties you buy are the right ones. We have extensive experience working with real estate investors. We can also provide you with first-hand knowledge of our own real estate investment projects to ensure you’re maximizing your returns. Send us a message or call us at (833) HMG-SOLD to set up a consultation!