Things to Consider When Buying Investment Property
As you have probably noticed, the housing market in the United States has been hindered by too few houses being chased by too many buyers, thus the choices for potential buyers are limited, and it also increase the prices, resulting in bidding battles in hotter markets. As a real estate investor, this fact is valuable so you can make smart decisions when it comes to buying an investment property. Houses that need upgrading or significant repairs located in hot locations may be wise investments. It doesn’t matter regardless you want to buy a house to sell it in the future for higher profits, or a multi-unit complex for rentals, these are valid and acceptable reasons why you shouldn’t be hesitant to invest in a real estate property. There are several things you need to consider before buying a property investment.
Mortgage insurance is not available for real estate investment properties, so you must be prepared for a huge down payment, and it is usually twenty percent to get traditional financing. Before the rent checks start coming, you have to also prepare to spend on unexpected repairs, especially if you’re opting for landlord services. You have to remember that income varies in a real estate property because tenants comes and go, and it may take some time renting out a vacated unit, most especially if it requires rehabilitation or repairs. Unless indicated in the contract that your tenant will be responsible for these expenses, it is your responsibility to pay the utility bills, mortgage, insurance and property taxes, and it is important to set aside a portion of your profit for these important matters. The amount of property taxes depends on the type of property and how long it has been kept, so it’s important to consider property taxes when investing in a real estate property, because you may discover a huge increase in property taxes if previously, a homestead exemption has been applied. If you are a newbie in real estate investments, beware of the risks of investing in real estate properties that require large-scale improvements, unless if you know a company who can provide quality work at bargain prices, because otherwise, you’ll end up spending too much on costly repairs. Your the best option is to find properties which only require modest repairs that are priced at below-market rates.
For first-timers in the field of real estate, experts highly recommend starting small, such as buying a single apartment, duplex or condo, to help you learn the process of investing in real estate, and then decide if you are willing to handle a larger scale. You may consider enlisting co-investors if you cannot afford to buy a property on your own, but you have to make sure you’re comfortable doing business, with a clear agreement in managing your investment.