3 Need-to-Knows Before Buying Your First Investment Home
Oh, to be rich! You’ve likely heard of someone who has earned a fortune through real estate. You may even have wondered “how hard could that be?” Like any other business endeavor, however, there are risks, and regardless of the type of property or whether you plan to rent or flip it, investing in real estate requires a healthy dose of thought and planning to ensure a return on your investment.
There’s a lot to know before buying your first investment property, so let us help you get started.
1. Do your research
Understand who you are targeting – the clients you hope to sell or rent to. After that, make sure that your new property is in a location that will appeal to them while giving you the returns you are expecting. “Investing in something you understand will provide the best return in the long run” states Jessica Sabanecio-Phillips, a Financial Advisor at Prospera Credit union.
Do the proper research and use an analytical approach, rather than considering your personal likes and dislikes. This will help you to purchase the best property.
2. Secure a down payment
Unlike the 5% down payment on the house you are currently living in, you are going to require at least 20% down to buy an investment property. This is because mortgage insurance does not apply to investment properties. “Make sure you have adequate financial resources,” says Jessica, “this will make it possible to be able to afford the investment property in the first place.”
3. Select a low-cost home as your first investment property
Even if you are ready to invest up to a million dollars in your first investment property, it’s always a good idea to go for properties that lie in the lower to mid-range price brackets. “The more expensive the property is, the higher your ongoing expenses will be” says Jessica. “You need to consider the cost of taxes, utilities, upkeep, and repairs.”
Don’t forget, you will likely need to spend money to renovate the house before renting or selling it. If it is your first investment property, keep your investment as low as possible and stay in the safe zone.
Looking to purchase your first investment home and need some advice? Prospera can help. Check out our website for more details and make an appointment with a Financial Advisor today with our easy “Click to Chat” feature.