Tips For Buying and Managing a Successful Investment Property
You might have heard that investing in real estate is a great way to create a source of passive income. That’s true, but when it comes to having a successful investment property, there’s nothing passive about it. A lot of work goes into setting this money generating system into motion. Let’s look at what you need to know when buying and running a successful investment property.
How You’re Going to Afford it
The first thing you should know is that buying an investment property comes with different rules from buying a residential property. According to NerdWallet, interest rates are generally higher on mortgage loans for investment properties. On top of that, your down payment can be as high as 25% depending on the type of property you plan to buy. As a first-time investor, it’s important that you shop around for the most affordable mortgage so that you start off on good financial footing. Of course, if you’re willing to put in some more work, there are ways you can work around the heavy financial lifting. Bear in mind, though, that these methods can get complicated and might be too much for your first time.
How to Find Your Investment Property
When you’re looking for your first investment property, there are a number of factors you need to consider. One of them is your budget. That includes what you can afford to spend on acquiring the property, doing renovation work and maintaining the property. That’s why it’s important to research what other expenses you might incur from being a landlord. For example, Mashvisor notes that some investors can be surprised by the unexpected fees of owning a condominium. The expenses of ownership, including the actual price of the property itself, vary according to location, so it’s important to research the real estate market in desirable neighborhoods. Go to a website like Redfin and you’ll find that, for example, the median sale price of homes in Baltimore is currently $118,000.
How to Make a Profit
Since the whole point of getting an investment property is to generate income, you need to know how to do that. According to SmartAsset, you can use the value of the property to determine how much rent to charge. It also helps to find out what other properties in the area are being rented for. It’s essential to make sure your rental will cover all the expenses that you’ll incur. With these figures in place, you can go even further to calculate what the overall return on investment would be for the property. Bear in mind that you can increase how much you can charge for rent by making improvements to the property (for example, the cost to renovate a bathroom averages $20,000). That decision should only be made based on your budget and how significantly it would increase the rental amount.
How to Find Your Ideal Tenant
If all the prior information is encouraging and you’re ready to move forward with an investment property, you’ll need to find the right tenant. While you can find tenants through word of mouth, placing advertisements online or speaking with real estate agents, you need to screen them as well. Make sure you give them a comprehensive application form to complete and be prepared to carry out an extensive credit check. A detailed rental agreement will also be imperative for defining the ground rules for your tenants. On your end, you’ll need to perform regular maintenance activities and emergency repairs in a timely manner. It’s best to keep on top of state regulations so you can make improvements to the property whenever required.
Investment properties can only contribute to your assets if you manage them properly. As a first-time investor, it’s best to do your research thoroughly so you know what you can afford and if the return on your investment will be worth it. Let the above tips guide you as you navigate the process of purchasing and managing your real estate investment.
Photo courtesy of Pixabay