Imagining a world free or your 9 to 5 is like a dream we want to turn into reality. Real estate has produced many wealthy people and therefore, there are myriad of reasons to start investing in real estate. Thinking about buying your first property? Here are 8 important tips to consider when buying your first investment property:
1. No personal debt
Pay off all your personal debts before thinking about going after buying an investment property! Expert investors carry debt as part of their investment strategy but, as a newbie you shoul avoid having any high interest personal debts like personal loans, medican expenses, children who will attend college soon. So, always have a bleeding margin of safety net before proceeding to buy your income property.
2. Save up your down payment
Since the approval requirements are strict in investment properties, and since there is no mortgage insurance available on incomeproprties, you should save up to at least 20% of your downpayment. Make a financial budget, a plan before going ahead with your property search and buying process so, you don’t have any impending expenses and have your downpayment ready rto buy your property.
3. Right location
Of course, this is the first question that pops up in our heads – Where to buy a profitable rental property? Choosing a location which has schools, malls, groceries, restaurants, parks, low property taxes would be the best potential investment property. A neighbourhood with hustling streets, or a quiet one depending on the location, access to public transportation, and a job market nearby would be the best choice for buying your property.
4. Property Management Firm
Do you know your way around the toolbox? How are you going to fix a dry wall? What about a water leakage or clogged toilet? If you are not upto all these maintenance request and repairs, look for a qualified team of property management who can also help you when you start building your portfolio and added more properties here and there. Hiring a property management firm definitely gives the peace of mind you need afer buying an income property.
5. Operating costs
Calculating expenses on the property like landlord insurance, maintenance costs, unexpected costs, etc . Adding all these costs here and there, your new property may give you a higher rent but poor decisions in calculating your margins, hih interest rates, etc., you should calculate your net profit and keep aside the operating cost.
6. Calculate your return
Calculating returns mean that for every dollar you have invested, what is your return on that dollar? A healthy rate of return is considered 6% and above. While of course, this number is going to rise every year with time and also, you will keep adding properties to your portfolio make a bigger impact on leaving your 9 to 5 and your dream to have a healthy and financially free life will come true!
7. A Final Word
Learn about your legal obligations, landlord and tenant laws, tax benefits, demang supply in the market. Doing yyour due diligence, knowing your obligations will make you confident in your new shoes. Networking with the qualified and experienced individuals and mentors can help with their experiences, learnings and challenges so, start investing stress-free with BV&Co.!
Looking forward to chatting with you.