Top 10 tips for buying your first investment property
Are you looking to make your fortune through property? Don’t dive in head first, it’s best to be well-informed. Arm yourself with our 10 top tips before starting your new career as a real estate tycoon.
- Make sure you can bring the property up to your standard
Property owners who own one or two homes usually do their own repairs to save money. Do you know your way around a toolbox? If you don’t like to get your hands dirty and don’t have a lot of spare cash, perhaps buying a second property isn’t such a good idea.
- Reduce your debt
If you have student loans, unpaid medical bills or if you have kids considering going to university, purchasing a new property might not be the right move. Sit down and be honest with yourself about your outstanding debts.
- Do you have the down payment?
Investment properties usually require a larger down payment than an owner-occupied building and have more stringent approval requirements. Budget for at least 20% for a down payment.
- Look into long-term interest rates
Borrowing money at the moment may be cheap, but interest rates on an investment property will be higher. Make sure it won’t eat too heavily into your monthly income.
Calculate your margins and set a goal of 10%. Estimate maintenance at 1% of the property value. Don’t forget to make your insurance, fees, property taxes, pest control and landscaping into consideration.
- To fix-up on not to fix-up?
It can be so tempted to purchase a cheap property and flip it into a rental. We don’t recommend you to do this if you are buying your first investment property. Unless you know a builder who can do quality work on the cheap, you’re likely to pay out a lot to renovate.
- Calculate expenses
Overall expenses on your property will be between 35% and 80% of your gross operating income. Make sure it’s worth it.
- Get a low-cost home
As can guess – the more expensive the home, the higher your ongoing expenses will be.
- Make sure the location is right
If the property is amazing, but the price is cheap, ask yourself why. It could be that the home is not in a desirable location, meaning it will be harder for you to rent or sell. Picking a home is the wrong location could be a catastrophic mistake.
- Educate yourself
Most important of all – get educated about the real estate industry. Read real estate books, blogs, websites, forums that discuss real estate business. This will help you understand more about the industry and how to succeed.
We wish you the best of luck in your new property adventure. Don’t forget about us when it comes to selling your house for a quick cash sale.
Written by: The Team | On: October 12, 2016