Are you thinking about investing in real estate? This could be one of the best financial decisions you ever make, but you need to do it right. This means you need to purchase a solid investment property that will make you money year after year.
Below are some guidelines to follow when buying your first investment property that will help ensure success. Once you’ve read and understood the below you can take everything you’ve learned about found out about your ideal investment property and share it with a buyers agent in Newcastle so they can help you find it.
It’s essential to purchase a rental property that is in good condition and at a reasonable price. But if it’s located in the wrong area, you could have problems renting it to good tenants, even with excellent property managers.
For example, a beautiful vacation home won’t get a lot of quality renters if it isn’t located near any tourist attractions. And a fixer-upper in a city without strong rental demand could make it challenging to keep it occupied.
So, think about the location first and then look closely at the property. Looking at the area first might seem counterintuitive, but the ‘perfect’ property isn’t worth much if it’s in the wrong location.
Be Cautious With Fixer-Uppers
If you’re a new real estate investor, you may consider purchasing a fixer-upper, doing the rehab, and then renting it out. When you do it right, you could end up with a highly profitable investment.
However, many newbie investors take on rehab projects that are bigger than they can handle. If you don’t have experience and a good contractor, you can end up needing to make repairs that are much more expensive than you anticipated.
The result may be a property that costs you much more than you anticipated, and the rent isn’t enough to make it worthwhile.
The best idea for the beginner is to look for homes that need only minor repairs and are listed below the market price.
Consider The Risks
Many people get into rental real estate without thinking things through. As a result, many investors make excellent money with rental properties, but others have nothing but problems. The issues usually arise with landlords who don’t plan and do their research before buying properties.
Some of the risks to remember before investing in rental properties are;
- The home may not have as many interested renters as you thought.
- You may have to pay for more repairs than you anticipated.
- Property taxes could rise.
- Unemployment could rise in your city and make it harder to find renters.
- You could have nightmare tenants that lead to evictions and property damage.
Of course, you shouldn’t only look at the risks of rental property; if that’s all anyone considered, no one would buy real estate. But you shouldn’t ignore these risks, either. No real estate investment is guaranteed, and you want to be sure you go into the transaction with your eyes open.
There is something to be said for a first-time investor starting with one inexpensive rental property, gaining experience and money, and then buying more.
One popular idea is to purchase a duplex or quadplex and live in one of the units. Living in the property you’re renting lowers your living costs. Plus, you can qualify for an FHA loan if you live in the property and pay as little as 3.5% down.
Living in the property and doing some of the repairs yourself is an excellent experience that will prepare you to take on larger projects later. Many successful investors started by living in their first property and expanding from there.
Investing in real estate can be one of the most worthwhile purchases you ever make. Do your homework and research to ensure that you purchase profitable investment properties.