Real estate is a sector where investment surely gives profit. Therefore, it is very important to make a sound investment in real estate to earn maximum profits. Investing in real estate is, of course, different than buying stocks because the first investment will only cost you a high amount of money. So, check these top ten tips to buy your first investment property.
Make Sure That the Property Is Meant For You
Do you know how to repair stuff at home? You must be wondering why that is even important because you can always hire someone to do that. Well, that’s true but another truth is that hiring someone to do that will cost you money and hence, your profit will be reduced. Most of the property owners, therefore, know their way to do most of the repairing stuff themselves. You have to make your hands dirty to make sure that the property that you are going to rent is perfect for the tenant. If you have spare cash with you, of course, this won’t be a problem for you.
Clear Your Debts
It is not a wise decision to invest in real estate if you are drowning in debts like student loans or unpaid medical bills. If you are not a savvy investor, then make sure that your debt is clear. If you have a good amount of money and you are sure that there is no financial debt or burden, then you can step in to buy rental property.
Check Your Down Payment
Investing in real estate needs a very high down payment. The scenario for the investor is totally different than an owner who owns just a single building. It would be easier for you to step ahead if you assume that at least 20% of the down payment will be needed for investing in real estate.
Make Sure Your Profit Is Higher Than the Interest Rate
The loan can be taken for sure to invest in real estate but never forget to look at the interest rate on the investment property. It is because you don’t want the interest rate to be higher than the profit that you will be earning; else there is no profit but only loss. Take a deal where the mortgage payment is so low that you can earn a good profit each month.
Calculate Your Margins
The big firms of Wall Street’s buy distressed properties with an aim of 6% return because they also have the staff to pay for. But things will be different for you and as an individual, you should set an objective of 10% return. The maintenance cost of the property should be only 1% annually and if you are able to calculate these margins, you will be earning tons of money in real estate.
Look for a Property That Needs Only Minor Repairs
A big property that can be bought at a bargained price can prove to be a temptation but you should avoid it if you are investing in real estate for the first time. Chances are pretty high that a house bought at a very cheap price will cost you a lot for renovating it entirely. Instead, try to buy a house that is priced below the market and requires only minor repairs.
Don’t Forget To Calculate Operating Expenses
The gross operating income of your new house can be good but remember that the operating expense of this new property will be approximately 60 % of it. Use the 50% rule to calculate the operating expenses of the new property. This will give you a fair idea about the profit that you will be earning.
Think about Profit
Look for return for every dollar that you spend in your first investing property. As a landlord, even if you are able to get 6% of the return for the first year, it will be considered that you are doing a great job. This is because the return will increase with each passing year.
Buy a Low-Cost Home
Buying an expensive home will cost you more expenses for a number of factors. Therefore, try to buy a low-cost home where the expenses can be reduced. It is recommended by experts that the first investment property shouldn’t be more than $ 1, 50,000. Consider investing in property to let in Virginia Water if you are looking for a low-cost home.
Location Is Everything
There is no profit in buying your investment property in a remote area because the demand for the rental property will be low in the region. Therefore, choose a location that has a good neighborhood and facilities to buy your first property. If you rent a house at a right location, you will be able to get a better profit. Rental homes in Sunning dale are a good example of a right location that can give you good returns.
Having realistic expectations will help you in rising up in investment property. Work with an experienced property to gain experience which can be used later in your other investment properties.