Investing in properties to be sold or rented is a worthwhile endeavor. Many people see property investing as a good way to make money, and it is, but only when you know what you’re doing. The wrong investment moves can result in frustration and financial loss. Here are a few tips to consider when you want to start property investing.
Before starting any investment into properties, potential investors should eliminate any debt they have. Someone who is skilled at the art of investing may be able to manage any debt they have while they’re dealing with properties, but a regular person without much experience shouldn’t try it. This can leave you without any funds to make any debt payments. Things like college costs, medical bills, and loans are all forms of debt that will be difficult to juggle with property costs. It is possible to invest with debt if real estate returns are greater than the debt, but this may not always be the case.
Many properties will require a down payment, but there is a difference in the down payment that you will have to make for an investment property versus an occupied property. A figure like 3% is common for occupied properties, but with investment properties, 20% is usually the starting point. These properties have approval requirements that are a bit more strict, and rental properties don’t have any mortgage insurance.
High-interest rates are a factor that all property investors should watch out for when looking around. Borrowing costs may be low enough at the moment, but when it comes to investment properties, interest rates can be high, exceeding the interest rates found on traditional mortgages. A mortgage with a low payment that won’t cut too far into the money that you get each month is ideal.
Always have a property inspected before purchasing it. Many properties have problems that can take a lot of work, money, and time to fix, and if you can’t dedicate any of these things to making the property usable, then you’ll be left with a bad investment. Structural problems, plumbing, and electrical issues, and even pests should be checked.
Some people like to go with a home that can be fixed when they invest, but these options should be avoided. A fixer-upper home can look like quite a bargain because many of them can be obtained for low costs and turned into rental properties that generate profit. For first time investors, it’s not a good idea to look for these properties because of renovation costs. If you can find a cheap, good quality contractor, or do all of the large scale work yourself, you’ll be in luck, otherwise, it will simply cost too much to get one of the properties to their best quality.
When an investment property is to be rented, the operating expenses should be determined beforehand. The range of 35 to 80 percent of the gross operating income is where the operating expenses will fall. The rule of using 50% is generally an easier way of figuring out expected operating expenses.
Anyone can get into property investing, in order to do it successfully, you have to be prepared. By following these tips, you can be on the path to investing in properties and reaping the benefits of them.