Buying investment property provides an excellent way to create a solid financial portfolio that ensures a well-funded retirement. Following are three things you need to know, however, before you get started with your journey on owning and managing real estate for investment purposes.
be Prepared to Put Down a Large Down Payment
Because traditional mortgage insurance isn't available for investment properties, you'll need to have a down payment of at least 20-percent. It's best to offer the largest down payment possible -- this provides you with opportunities to get lower interest rates. Keep in mind that investment properties are long-term financial strategies, so it's in your best interest to keep interest rates as reasonable as possible.
Tread Carefully With Fixer-Uppers
Many people find themselves attracted to the idea of purchasing residential property that needs a little work, fixing it up themselves, and making a tidy profit when they resell it. However, these projects often fail to go as planned. Unless you've got a lot of time on your hands and are extremely handy with repair and renovation work, you may be lucky to even break even if you buy a fixer-upper. Paying a contractor to perform certain renovations generally eats up profits involved in flipping houses.
If you're determined to give the fixer-upper strategy a try, look for a property that only needs cosmetic improvements such as new paint, wallpaper, and landscaping. Have the structure thoroughly inspected before signing the final purchase papers so that you're not faced with any unpleasant surprises such as a broken down plumbing system or extensive dry rot.
Learn How to Find the Right Tenants
A good property management company can keep your journey with investing in real estate from morphing into a nightmare. Finding the right tenants isn't nearly as easy as it looks, and the wrong tenants can cost you money in more ways than one. Besides lost rents due to irresponsible tenants, you may face damages to the property as well. Calling references is no longer enough when it comes to finding good tenants -- screening tenants involves comprehensive background, criminal, and credit checks these days in order to weed out the bad apples.
Many of those who purchase investment properties start out trying to manage them themselves until they run into too many frustrating situations -- whether it's a string of bad luck with tenants or frustration with normal property maintenance tasks. The services of a good property management company can help decrease the possibilities of these issues occurring. For more information, contact companies like Block & Associates Realty.
