edited in 2023
Thinking about buying an investment property?
Purchasing an investment property is one of the most rewarding decisions that you’ll ever be a part of. Here are the six tips that you need to consider to make sure that that you don’t get fleeced.
Find the right property at the right price
Yes, we know this is a whole lot easier said than done. However, it’s not impossible. It takes some patience and research. You’ve heard it before, everything around is getting sold over-asking. Don’t just jump in because of those sentiments. Rather, do your research and understand the true value of the property you’re considering! Further, you need to know that various property classes will outperform each other. As we reviewed the various real estate investment options earlier, they each appreciate differently. For example, land and commercial multifamily will appreciate differently.
Figure out the cash flow
It’s always a good idea that you know how to maintain your mortgage repayment obligations over the long term. It’s recommended that you analyze the cost of servicing any loan only on an after-tax basis. By taking this approach, you have the power to calculate and put the cost into actual terms that make sense for you.
Look for a good property manager
Finding a good property manager who is a professional in his or her field is vital. Your property manager’s job is to make sure that everything is in order between you and any of your tenants. A good property manager can extract the best possible value for you from your property and help to keep your tenants in line as well.
Choose the appropriate type of mortgage
There are many options available for financing the investment property that you choose, so it’s best to get sound advice from your financial advisor. Options such as a variable rate loan and a fixed rate loan are both popular choices, but your specific circumstances will dictate what’s most suitable for you. Consider that variable rates often end up being cheaper over time, yet fixed rates at the right time may work better. Here are some other common financing options.
Use equity from another property
There is always an option to leverage the equity from your residence or another investment property. Doing this is actually an ideal way to purchase your next investment property. Your equity can be calculated by way of calculating any difference between what you owe on your mortgage and the overall value of your property.
Comprehend both the market and dynamics when buying
It’s best to analyze what other properties are available in the area when you’re looking at an investment property. Talk to both local people and real estate agents in the neighborhood. They can give you hints on small, yet vital, things like which side of a street is considered more desirable.
These are the six tips to help make sure that you don’t ever get fleeced when buying an investment property. They can make the difference between purchasing a great property that has a high return on investment and purchasing a dud.
Real estate remains to be one of the safer and more resilient investment vehicles. Interested in learning more? Check out our first education series where we also review how multifamily investments are resilient in the face of a financial downturn. Contact us now!
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