If you’re thinking about taking the plunge and making an investment then real estate is one of the best ways to go. Stable markets, high returns, and a high chance that returns will increase over time makes real estate an ideal investment, especially for anyone with lower starting capital. Unfortunately, it’s not the easiest market to get into because it requires a great deal of research, caution and care. The following include a few easy tips to get you started with buying your first investment property.
If you want to invest then you need capital or initial investment funds. If you already have the money then good for you but if you only have part of the money, make sure that it is at least the down payment on a mortgage for the property. Paying on a mortgage is actually the most common way for lower budget investors to get started with buying rentals. You can also get together with a local real estate group or friends to purchase an investment home together. Each of these options has their own pros and cons, although the last is definitely the most complicated.
Choose a Type of Investment Property
The type of investment property that you choose should mostly depend on your budget. Most individuals with lower capital tend to invest in a single family home or duplex because these cost less than options with larger units. However, statistics show that the price per unit can decrease by as much as 80% per unit when you purchase 5 or more units at once. That means that while a house might retail for $350,000, you may be able to get an apartment complex with 10 unites for around $800,000. The result is that you have more potential for return on investment. However, these do require a great deal more investment capital. If you’re on an extremely low budget then a DIY home that needs a lot of work may be a better option, just keep in mind that repairs are costly. The best way to calculate your potential returns is to check what you would be getting in rent per month, deduct at least thirty percent for repairs and then deduct taxes. What you have left is your income per month. If it’s less than the mortgage would be, it may not be a good investment property.
Choose the Right Realtor
No matter what kind of property you’re looking for, you need the right realtor to make it happen. You can ask for reviews and recommendations, check sites like Agent Harvest to find the best rated and top selling realtors and interview a couple of different options to see which is best for you. The ideal realtor for an investor is someone who will look out for low-cost homes and buildings suitable for renting. Typically, if you tell the realtor your requirements, they should be able to find something for you. Your realtor is especially important if you plan on mortgaging the house to pay it off, or if you plan on purchasing more than one investment home.
You should always research the area, the home, and the condition of the house before you purchase it. While a good real estate agent will be able to tell you about the local amenities, you’ll also have to do a certain amount of research yourself. Before you consider buying property, you have to know your potential return on investment, which means knowing rental rates in the area as well as the likelihood of rental. For example, if there are three houses for rent on the block standing empty, it might indicate that there is no demand for rentals. On the other hand, if there are new jobs opening up in the area without any real increase in housing availability, then you can expect that rentals will be in high demand. Things won’t’ always be quite this clear cut, but make sure you research how much you are likely to make.
If you don’t plan on hiring a professional to handle your property management for you then you will have to learn to do this yourself. A quick look at local state laws applying to tenants and landlords, and possibly taking a course on real estate management at your local community college should get you off on the right start. If you’re busy, in the wrong area, or don’t like dealing with people, then you really want to ask your real estate agent if they know of any quality property managers in the area.
About the Author
Lee Rael has been investing in homes for five years and he’s well acquainted with the real estate market. To him, the most important part of finding investment real estate is finding a great realtor, and from there, everything else is easier.