Buying property for investment purposes can be difficult if you’re starting in the real estate industry. Regardless of which area you live in or plan to invest your money in, real estate is one of the better investments a person could make. The reason is that property will always appreciate no matter where you purchase the home. Many other assets out there will depreciate following the purchase. Did you know that when you buy a car, you lose ten percent of its value as soon as you drive it off the lot? Money may also be a depreciating asset; due to inflation, that dollar you may have today will not be worth the same in a few years. As a home-buying company, we believe that buying rental property for investment purposes can be the best asset you may own in your investment portfolio – we’ll tell you why & a few tips to help ensure purchasing a house will be profitable.
First, you need to choose your location; this is a massive part of buying an investment property. Not only do you need to decide on the site, but you need to know how to decide on the right tenants and screen those tenants properly so there are no issues. Determining the correct price to purchase a property is also an enormous factor. You’ll need to ensure you do not overpay when buying rental property. There are plenty of factors that go into this big decision. It is never a good idea to be an impulse buyer. Sixty-one percent of people in the United States of America are impulse buyers, more than half of our population. Companies know this about consumers; this is why everywhere you go, you see an ad persuading you to purchase something; it’s present in your email, on your television, on the internet, and multiple videos, simply everywhere you look. Why not buy something that will generate some income? Let us guide you on the right path to financial freedom by presenting some key points on becoming a home investor in any real estate market!
Location When Buying Rental Property for Investment Purposes
Location is a huge factor in deciding when you purchase a rental property. First, you must determine whether you want something close to your primary residence. This is not a requirement to live near your rental property, but it provides be highly convenient. Plenty of landlords live across the country and rent out homes. However, being close to it might make sense if you fear the property will run into numerous issues unless you hire a property manager. We only recommend hiring a property manager if you have more than ten properties or cannot find the time to manage the properties yourself.
When deciding on a location, you want to find an area with low taxes and decent rental rates. Suppose you pay two thousand or more in taxes but receive less than one thousand monthly rent. You can see why these circumstances will not be beneficial to you. The lower the taxes, the higher the rent leaves you in a great position to profit more from your rental property. Make it a desirable location for your tenants, as you don’t want your property far from transportation or shopping stores and businesses. A better place, happier tenants, and keeping your rental property occupied are more accessible. Always find out if the area you’re considering has a sizeable rental-to-homeowner area. Which is something you can always ask an agent that you’re working with. You know you’ve chosen a good location if you are in a high rental area amongst other rental properties.
- The location of your rental property is crucial; most landlords prefer their rental to be close to their primary residence because of the level of convenience if any issues arise. If your rental is out of state, using a property manager is suggested.
- Things to consider when purchasing a rental property are an area with solid rental rates, low taxes, and potential for population growth.
Utilize a Professional
At times buying property for investment purposes can be overwhelming; homeowners are faced with tasks such as maintaining the property, completing house repairs & finding qualified tenants to rent the property! Most of us have hectic schedules and other responsibilities, so managing a property as a landlord can become challenging. As a landlord with an existing mortgage, it makes sense to try to turn as much profit as possible, so we tend to avoid hiring a real estate agent to acquire a house and a property manager to oversee the home and any issues that may arise.
Utilizing an agent can be very beneficial; the agent can locate the best deal possible while properly running real estate comps to determine the home’s exact value. A licensed realtor can conduct a walkthrough to assess the R.O.I (Return On Investment) & any obstacles, such as plumbing, electrical, and structural issues. A property manager can supervise the home, discover suitable tenants, collect monthly rent, & handle any problems. It’s always important to assess the time, money, and effort you’ll be able to put forth into your rental or investment property and weigh out the pros and cons of hiring an agent or property manager to overlook your operations.
- Hire a property manager to oversee qualifying a potential tenant, ensure the property is adequately maintained, & house repairs are completed promptly.
- Use a real estate agent to assist you with acquiring a rental property. Licensed realtors know the signs to look for when guiding their clients toward a beneficial purchase. In addition, agents have access to MLS to run their comps and calculate the R.O.I on the subject property.
Screening Your Tenant
The most important thing about investing in property is appropriately screening your tenants. If you rent your property to the wrong person, who may not be qualified, it could raise future issues. Always ask for credit report history to see what amount of debt they may owe and to whom. Creditors look at credit history because, eighty percent of the time, it’ll represent how well this individual will pay their bills. If they have a few issues with their credit report, speak about the problems. You can look past a few insufficient payments if they give you an honest answer. Always make it a requirement to receive your rental property’s first, last, and security deposit. It will allow you to receive three months’ rent if things do not go well with the tenant. It will also qualify the tenant a little better. Working with your tenant is a massive part of buying property for investment purposes. Making for a two-way street will make the experience go much smoother.
- Properly screen your tenants to avoid future obstacles like a squatter situation. Review the individual’s credit history to ensure they pay all their bills on time. Request the first and last month’s rent and the security deposit before the tenant’s move-in date.
Never Overpay
Ensuring you never overpay for a rental property is the number one issue most new landlords face. However, every investor follows a simple rule in buying rental property. They follow a cap rate rule, meaning they want to purchase property at a specific cap rate — getting a certain amount of other investment money back each month. For example, if you buy something for $100,000 and get $1,000 in rent each month for the property, you get 1% of your money back each month. You can quickly figure this simple rule out by dividing your net monthly rent by your purchase price. Most of the world’s best property investors will stay at an 8% to 10% cap rate. So, if you can find a rental providing that money back on the investment, we highly recommend you buy that home today.
- Follow the cap rate rule: Aim for a cap rate between eight percent to ten percent.
Everyone Wants to be Rich Quick
Everyone would love to be rich. We work hard every single day to make as much money as possible. What matters is precisely what we do with that money. Suppose you would like to treat yourself and buy that fancy car. Maybe you are conservative, keep all your money in savings, and prefer not to spend. If we decide to invest that money, we all want to ensure we do it correctly. If you buy a home, make sure you do it correctly. Please research and speak with professionals to see what they tell you. Contact a local agent; they can help guide you when buying property. Rental income can be considered passive income money that comes in like clockwork. The more you own, the more you can make. It may even help some retire at an earlier age than expected. We all want financial freedom, and holding a rental property may answer most people. When you get up and are ready to retire, you can liquidate every property and retire on a beach somewhere! (Buying Rental Property for Investment Purposes)
We’re Buying Property 215, a family-owned real estate company in Philadelphia. We specialize in purchasing property in any condition requiring no repairs or renovations. Our company covers all closing costs and fees! Selling your home with Buying Property 215 allows for the most significant profits! The Better Business Bureau accredits our small business with an A+ rating!
