What to Look for in an Investment Property
You are ready to get into the real estate game and think beyond your personal home when you are looking for an investment property. Real estate is what has generated some of our wealthiest people in this world. It is important to take you time, seek advice, and follow some of the tips below for buying your first investment property.
1. Are you cut out to be a landlord?
You really need to consider this before buying a rental property or consider the cost of hiring a property manager if it's not an area you think you will excel in. This is a huge part of owning a rental. You are responsible for all repairs and even the mortgage on the property if for some reason your renter does not pay their rent. A lot of times when you are starting out you are doing all the repairs yourself to save money as you build your real estate portfolio.
2. Find the right location.
You do not want to get stuck with a rental property in an undesirable area. Pick a city that is growing and popular for your potential investment. Look for a location that has low property taxes and a good school district. This is desirable for families. Look for amenities like parks, malls, restaurants, museums, and movie theaters.
3. Should you buy or finance?
It is always best if you can buy with cash for an investment property but you can finance and this all depends on what your investment goals are. Paying cash can automatically generate a positive cash flow while financing can mean that you are just barely breaking even for a long period of time before you are in a positive cash flow. It is important to consider the reason why you are investing is to gain that positive cash flow. This means you are calculating your margins before making the decision. You should set a goal of having a 10% return at a minimum. Maintenance costs should be at 1% of the property value annually, so you want to avoid a fixer-upper.
4. Always know your legal obligations as a landlord and look at your risks vs. rewards.
This is a big financial decision and you have to determine if the payoff is worth the risk for you and this can look different for everyone, especially depending on the monetary amount you have to play with. Ask yourself, for every dollar that you invest, what is your return on that dollar? Calculate your operating expenses and calculate that 50% will be used in expenses.
For more information on homes in Granbury Texas including investment properties please contact us anytime.
More Real Estate Tips:
- 10 Ways to Ruin Your Chances of Getting a Home Loan
- How to Tell if the Home You're Interested in is OverPriced
- Is a Second Home the Same as an Investment Property?
- 5 Reasons why People May Choose to Rent vs. Buy
- 7 Things Buyers Look for in Lake Homes
- Getting Pre-Approved Before Buying a Home May Not Always Work Out
NTREIS data last updated September 26, 2022.