An Introductory Guide to Buying Your Own Investment Property
This is a guest blog from Katie Conroy who works with
If you are looking to make an investment that will gain in value as the years go by, property is a great option. You can rent the space out for years to get a regular, steady stream of passive income. Since real estate tends to appreciate with time, you can then sell it down the line and make a profit. Despite the obvious benefits of an investment property, it can be a daunting step to take, as it does require a significant financial commitment. Find out how you can avoid mistakes and pave the way for success with the below guide.
Select a Lucrative Location
Ideally, you will purchase an investment property that is within driving distance of your home; this allows you to take a hands-on approach to management later. What’s more, when recruiting potential renters, you can easily meet them in person and show them the place. Plus, when issues arise — like a broken pipe — you can be close by to handle them.
Alternatively, you can hire a property management company to take care of these details. Whether you’re renting your home to vacationers or long-term tenants, a property manager can offer local support, market your property, accept bookings, and add home security features like digital locks. When you hire a property manager, location is less important. This gives you the advantage of being able to invest in high-demand areas, allowing you to consider factors like vacancy rate, current home prices, and potential for new jobs. For example, if a city is opening a brand new large hospital or manufacturing plant, this will create jobs and attract new residents in need of housing.
Research Your Financing Options
Once you have a better idea of what location you want to invest in, start scoping out the real estate market by examining current housing prices. Trulia allows you to search for diverse geographic areas. The website also provides handy details about different neighborhoods. For example, if you want to rent to families, scope out areas with schools nearby. As you assess neighborhood-specific housing prices, you can start calculating how much money you will need for a down payment if you’re going to buy a property in that area. It’s best to make a down payment of at least 20 percent of the sale price. This will allow you to secure a lower interest rate and means smaller mortgage payments. When you make a larger down payment, you also forego the expense of private mortgage insurance.
Make the Property Ready for Moving In
It’s unlikely that the property will be immediately ready for tenants. You may have to take steps like adding a fresh coat of paint to the interior walls or replacing outdated kitchen appliances. You can also consider offering the property for rent on a furnished basis, as this generally allows you to charge more. Consider your target audience as you prepare the home. Are you planning to rent primarily to families? If so, an addition like a fence around the yard (which keeps pets and kids safe from surrounding streets) can make the house more marketable. If you’re planning to rent to young professional singles, on the other hand, appealing extras might come in the form of a jacuzzi tub or home office space.
Add a Home Security System
Whoever you rent to, they will surely appreciate the sense of safety that a home security system provides. Home security systems can actually reduce your home insurance costs, saving you money in the big picture. You can also add more affordable home security touches. For instance, simply installing more outdoor lighting and planting prickly bushes in front of windows can deter break-ins. If there are basement windows, get bars installed. It’s a cost-effective one-time investment that you won’t have to replace for years, if ever.
Follow these guidelines and the process of buying and managing an investment property will be less daunting. While it will take time to find and prepare the perfect piece of real estate, it will be well worth the effort. You can then enjoy a steady stream of money for years to come.
Thank you to Katie for reaching out to Reel Property Solutions, LLC to write this article! If you or someone you know would like to promote your website and partner to write content, reach out!
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