5 Tips for Buying Your First Rental Property
Investing in real estate is one of the excellent ways to financial freedom. It allows you better leverage on your finances and develops your business acumen. In fact, some of the world’s wealthiest people have become so through investing in real estate. In this regard, one can definitely assume that real estate is not only a sound but wise investment. However, much like any investment there is the world; it would bode well to do your research first before testing the waters. After all, any type of investment is a risk and it is best to meet and mitigate that risk by arming yourself with an arsenal of information that would help you in your cause and endeavor.
To ensure that you are well-versed in the comings and goings of investing in a real estate property and tenancy, it is best if you read on some failsafe tips first before attempting your venture. In this way, your losses will be mitigated and the risk would be reduced. Whether your first investment property would be a condo in Lahug or elsewhere, here are some tips that would prove to be useful:
Make sure it is for you
Do know that being a landlord especially in the initial phase is not a job everyone can handle, so be sure that you think this is truly your calling. Are you handy with repairs? Can you unclog a toilet? Do you even possess a toolbox? Sure, standard repairs might be something you can get someone else to do but at a cost. If something in your rental property is constantly breaking down, getting professionals to fix it can easily eat up your finances. Property owners save money by doing their own repairs and if you do not possess handiness skills or do not have any spare cash, perhaps this is not the type of calling you should be answering.
Pay down your debts first
If you are a seasoned investor, maybe you can carry debt as part of your investment portfolio. After all, this is your expertise so you should be able to defray it without issue. However, the average person would be wise to avoid debt at all costs when they wish to purchase rental property. Should you have any financial obligations left unpaid such as medical bills, student loans, children attending university, putting the purchasing of rental property on hold will be more financially sound.
Get the down payment
A larger down payment is generally required for investment properties more so than owner-occupied properties. In this regard, we can readily assume that the approval requirements are a lot more stringent. Mortgage insurance is not available on rental properties, so you would need at least twenty percent of the total price. With this in mind, it is best to have a significant savings fund to pay your down payment.
Do not buy a fixer-upper
Sure, buying a downtrodden home and fixing it yourself sounds like a bargain and is a rather enticing prospect. However, do put in mind that this is your first property which means that this may not exactly be the most brilliant idea. Flipping houses is great, but not when it is your first investment property. However, if you happen to be skilled at significant or large scale home improvements or have a contractor to do excellent work affordably then by all means, go for it. Unfortunately, if you go without both, you are likely to pay a hefty sum for renovations alone which would defeat the purpose of you getting the property for cheap. Look for a property that is priced below the market instead and has only minor repairs which are rather easy and cheap to fix.
Find the right location
When it comes to having a profitable investment property, you need to find a place that is a prime pick for tenancy. This means looking for a premier location that is low on property taxes, is in proximity to entertainment hubs, offices, decent school districts and has a low crime rate. Furthermore, it would not hurt to have your property situated in a progressive job market with plenty of amenities such as parks, theaters, malls and the like.
