Many people will always prefer real estate investment when saving for the future or diversifying their portfolios. However, whether you want to invest in residential or commercial real estate, it is critical to research before purchasing.
Buying a home as an investment property is very different from buying a home for personal use. Whereas you buy a family home with your heart and select your property based on subjective criteria, buying a property to rent requires a different set of considerations. To be sure that you are making a solid financial investment, this must be a decision made entirely based on your wits.
If you are investing in real estate for the first time, knowing what to look for, how to handle this type of transaction, and what legalities you should be aware of should be your priority. You should be mindful of all of this before committing to buying anything.
How can you prepare to buy your first investment property?
Budget
This is a rental property and should be treated as such. You must enter this with a clear understanding of what your budget allows for and what type of return on investment you may expect. If you have the cash on hand and ready to go, you will be prepared to commit right away if the perfect home comes along.
Include in your budgets charges such as realtor and solicitor fees, renovation work, real estate securities law and preparing the property for tenants. You must have a plan in place to allow you to start making money as soon as possible, as well as an awareness of what you can typically expect to get from the time you clear escrow until your investment starts making you money.
Market Research
It is vital to research the type of property you want to invest in and the surrounding market for that property. Knowing what properties are selling for and rental revenue yields will help you establish your rent pricing and how long it may take to get renters into the property.
Consider impacting factors such as neighborhood amenities, transportation connections, and highway access, as well as current resident demographics and the homeowner-to-renter ratio.
Location
After you are better aware of the local area, you will know what type of property to seek. For example, if your town has a hospital or university, purchasing a house popular with folks who attend and work at these institutions is a safer investment than buying a family home.
Other good investment opportunities include looking for regions with a high number of tourists or those undergoing reconstruction. This will likely attract more people to the area and help you accomplish your maximum rental goal.
Recognize Your Goals
When you know exactly what to expect from your investment, you will better understand which options are appropriate for you. If you are in it for the long haul, investing in properties that will attract long-term renters, such as families, will be your best choice.
If you want to buy, flip, and resell houses, looking for properties that require some work or foreclosures may help you turn it around quickly and go on to your next job.
Consider the type of work you want to do on the property and the type of clients you want to attract while looking at commercial properties. This will give you a better idea of what kind of property to look for and what options you have for expanding and renovating the space.
Diversify
Investing all of your money in a single home may limit your financial options. Instead, it may be possible to develop a broad portfolio by investing small sums in various properties. There are several things to consider when constructing a diverse portfolio. Real estate crowdfunding, for example, minimizes the additional burden of property investment by allowing you to own a smaller portion in numerous distinct properties rather than just one.
What Level of Involvement Do You Desire?
Do you want to be the landlord that does everything themselves, or do you want to delegate everything to a letting agent? If you’re going to have a renting agent manage any tenant issues, you must factor this cost into your projected returns.
Choosing this option may get you a better deal regarding non-paying tenants or damage caused by inhabitants. However, if you decide to be a hands-on landlord and deal directly with your tenants, you must be aware that this entails a 24-hour commitment to be available for your tenants at all times. You will also be directly responsible for rent collection.
To summarize, investing in real estate is never a terrible idea; however, understanding what you are getting into before investing any money will help you make the best investment for yourself and your money. Pay attention to the specifics to help you build a more accurate picture of how you want to proceed and what to expect along the way.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)
