Buying Your First Investment Property? Top 5 Tips

Real estate is the best form of long term asset; it is also is the best form of investment. Like every other investment this too needs you to be well-versed with the things you are diving into. Here are five tips that are very helpful in finding an investment property right for you.

Understand the Responsibility:  Every home needs you to own up to certain level of responsibility especially when it comes to the small repairs around the house. Maintaining cleanliness at the house is very crucial if you are planning to lease the house. In simple words this will be a part time job that will need some sort of supervision.

Pay Down Debt First:  In the enthusiasm to buy a home do not forget your past debts. Because once you plan to buy an investment home your entire debt portfolio is a part of the investment you can afford. So if you have student loans, recent medical bills then it are not the right time for you to think about an investment home. Pay all your debts before you make any decisions on an investment home.

Got the Down Payment?  Investment properties generally require a larger down payment than an owner-occupied building and have more stringent approval requirements. The 3% you put down on the home you currently live in isn’t going to work for an investment property. How much will you need? At least 20%, given that mortgage insurance isn’t available on rental properties.

Calculate Your Margins: While thinking of investment properties aim for 5% to 7% returns because they have to pay a staff. Individuals should set a goal of 10%. Estimate maintenance costs at 1% of the property value annually. There’s also insurance, HOA fees, property taxes and monthly expenses such as pest control and landscaping. Make sure you estimate everything before you make the decision.

Find the Right Location: Look for low property taxes, a decent school district, a neighborhood with a low crime rates, an area with a growing job market and plenty of amenities, such as parks, malls, restaurants and movie theaters.

Keep your expectations realistic. Like any investment, a rental property isn’t going to produce a large monthly paycheck for a while and picking the wrong property could be a catastrophic mistake. 

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