If this is your first time to invest in a real estate property, it is pretty normal to feel overwhelmed with the entire process. After all, there are many things that you need to consider and keep in mind.
To help you in your journey, we have listed seven primary things you need to consider before purchasing an investment property.
Although your situation may be unique to you, the factors listed below can help you determine whether you are now ready to buy a property. Otherwise, you can have an insight into what to look for while looking for a worthwhile real estate investment.
Consider your investment property in context. A beautiful vacation home won’t cut it with vacationers if it’s in a location that not many people visit.
It would be helpful if you do thorough research first on the area you want to invest in.
Ask whether the neighborhood is safe. Are there any transportation options around it? Are there any commercial centers nearby? These are some questions you need to ponder before investing in a property.
2. Legal obligations
Rental owners also need to be familiar with the landlord-tenant laws in their particular state or locale.
For instance, you need to be aware of your tenant’s rights. In addition, both of you have obligations to fulfill. Thus, you have to be wary of things to consider like security deposit, eviction rules, requirements of the lease, fair housing, and so on.
Doing so ensures that you are not causing any legal troubles for yourself.
3. Low-cost home
Although you have a million dollars to spend, it’s always a good idea to look up properties in the low-mid range price brackets.
Some experts even suggest that you buy a property that won’t cost you more than $150,000. You’ll also need to consider that you’ll be spending money on renovations before you can rent or sell them.
As your first investment property, make sure that you keep it as low as possible. Doing so allows you to stay in the safety zone.
That way, if there’s a chance that you won’t hit your expected profits, there’s no risk of losing too much.
4. Inspection reports
Before you buy an investment property, you should have it professionally inspected. Usually, the buyer can check the property, as written on the initial purchase agreement, as a purchase contingency.
You will likely have about ten days from the agreement signing date to complete the inspection. You also need to be present at the actual inspection so that the inspector will explain to you directly any potential issues that may arise.
It is also a lot easier for you to know your risk appetite if you already know what the problems are.
5. Know the risks
Like with all things in real estate, purchasing an investment property doesn’t come without risks. You need to know the risks.
You should also note the following:
1. You might not have the rental interest you’ve expected.
2. You can end up spending more on costly repairs.
3. Your property taxes can go up.
4. The local market can quickly change.
5. You can end up having bad tenants, which can lead to expensive maintenance and eviction costs.
However, try not to focus on the risks alone. If that’s what everyone did in the first place, then they wouldn’t end up buying real estate properties. After all, no one investment can guarantee you a high return. What’s important is that you look at a property’s earning potential.
Also, make sure that you wouldn’t be blindsided in case something goes wrong. You should also ensure that you’re flexible with your finances as well. Getting a home insurance policy might be a good idea. Make sure to do your research and find out about different types of policies and what they cover. For example, most standard homeowner’s insurance policies only cover flood damage caused by something sudden or accidental in your home, such as an appliance malfunction. If you want to be covered in case of flooding due to severe weather or a natural disaster, you would need to purchase flood insurance.
6. Value appreciation
This usually happens when the property value rises because of the changes in the real estate market. Some examples were when you renovated your property, or a commercial center was set up nearby.
Real estate appreciation can be tricky because you can’t easily predict things.
7. Current real estate market status
Conditions in the property market constantly change. If you’re selling your property, a high price means that it’s in excellent condition. At Maid Sailors House Cleaning Services Austin, we always tell our clients to ensure that everything is spic and span before listing their property.
Also, if the prices of properties are low, you would rather buy properties than sell what you have.
Before you invest in real estate, do some research on the area so that you’ll know the different market conditions. These are crucial elements you need to look into before investing in real estate.
Buying a real estate property is probably one of the most fruitful investments that you can ever make. So, make sure that you know how to navigate through the process. Evaluate the different factors we have mentioned above, and make sure that you make smart investments over time. Good luck!