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. Properties needing significant repair and renovation but are located in hot locations are wise investment. Whether you are considering buying a multi-unit complex for rentals or a house so you can sell it in the future after renovating it are all acceptable and valid reasons to engage in real estate investment. There are several things you need to consider before buying a property investment.
First and foremost mortgage insurance is not available for real estate investment properties, so you must carefully plan and prepare to bring out a huge down payment, which is usually twenty percent 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 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. Your the best option is to find properties which only require modest repairs that 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. If you cannot afford to purchase a property on your own, you may consider enlisting co-investors, but you have to make sure you’re comfortable doing business, with a clear agreement in managing your investment.