It may not feel like the right time, but right now is the perfect time to put your money into real estate if you have the ability and the option to do it. So! Where would you start?
There are few things you need to first consider when thinking about potential investment property.
Guest Author - Katie Conroy from advicemine.com
Buying an investment property is a hugely popular endeavor, and for many people, it provides great benefits. However, there’s a lot of work involved, and it’s not for the faint of heart. If you’re thinking about getting into property investments, here are some things you’ll want to consider.
How Will I Finance the Purchase?
The first step in property investing is to get your finances in order. If you’ve got a lot of money saved up, you might be able to buy a property in cash. However, many investors need to finance the purchase. Investopedia says that getting a conventional bank loan is the most traditional route, but you can also get a flip-and-fix loan or tap into your own home equity. If you plan to use financing, you’ll need a larger down payment compared to what you’d need for a primary residence. In fact, some banks require up to 30 percent down.
Does This Property Have Potential?
Once you’re in a good financial position to buy a property, you can start the fun part: looking for a home to purchase. When choosing a property, think about how you intend to use it. Some investors buy a property and simply hold onto it until its value increases, then sell it for a profit. Others want to earn passive income by renting out the property. Either way, Kiplinger explains that it’s crucial to calculate the return on investment (ROI) you may get before moving forward.
If you’ve got renting in mind, you’ll obviously want to get a property that will attract renters. The type of renters you appeal to can depend on where the property is located. For example, buying a home in a tourist destination means you could possibly make good money on short-term vacation rentals. Buying in a good residential neighborhood, on the other hand, is much more likely to draw in renters who want a long-term lease.
Are Major Repairs Needed?
An older home can make a great investment, especially if the list price is low because repairs are needed. However, any repairs are going to affect your investment. If there are issues with the home’s structure, electrical systems, plumbing or other major components, it’s going to be expensive to get the home into good condition to rent.
If issues are identified in a home inspection report, you’ll want to do a cost analysis to determine if it’s worth your money. A run-down furnace, for example, can be somewhat expensive to fix or replace, but the job isn’t quite as involved as replacing a whole roof or repairing a foundation.
When it comes to furnaces, you can expect to pay between $1,000 to $6,000 on average for a replacement. However, the type of furnace you choose, such as gas ($2,000 to $10,000) or electric ($1,200 to $7,000), will greatly influence the price. Keep in mind that the specific model can affect your budget too. For example, high-efficiency gas models will cost about 50 to 100 percent more than a standard model.
Don’t forget that major repairs can be a good bargaining chip when negotiating with the seller, but only if you’ve researched how much the issue affects the home’s value.
How Will I Manage the Property?
Managing a property probably takes more work than you think. If you choose to take on the responsibility yourself, you’ll need to maintain the property, advertise the unit, make rental agreements, deal with tenants, collect rent and more.
A good alternative might be to use a professional rental management service. This is especially beneficial if you own a vacation rental that’s nowhere near your primary residence. A quality vacation rental management service will offer 24/7 support and cover housekeeping duties, bookings, and other services. The benefit of using a service is that you offer renters a better experience, which results in positive reviews and more repeat bookings.
Buying a rental property is a major decision, but if you take the right approach, it can be a great investment. By choosing a property carefully, you can find success in property investing.
To take advantage of today’s hot market, contact Lisa Ash today.
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Lisa Ash,
REALTOR®, CRS, CDPE, SRES
Homes By Ash Real Estate Team
Keller Williams Realty Integrity NW
PH: 612.701.8368
EM: Lisa@HomesByAsh.com
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