If you’ve been looking for a stable, long-term investment in Pelham, residential rental homes might be the investment you’ve been looking for. However, buying an investment property is not the same as buying a residence. First of all, you need to know a few details to make sure that your first investment property is successful. To give you a head start, we’ve listed down the basics of buying an investment property. Use this guide to gain confidence when you purchase your first residential rental property.
How It Works
The concept of buying an investment property is a pretty straightforward one: investors purchase a property with the intent to lease it to a tenant. This buy-and-hold model is one of the most common ways that real estate investors start their property portfolios. Remember, though, that buying your primary residence is not necessarily the same as buying a rental property.
A typical mistake usually made by first-time investors is to buy a property that they want to live in. This typically leads to an emotional attachment to the house, which is not at all a good thing; especially when it’s a property you want to rent out. Instead, investors use a set of calculations and market comparisons to find and evaluate properties to buy. Keep track of the fair market value, the fair market rent, and your expected return on investment (ROI). These are significant details you need to be keeping an eye on. You can compare the different properties in the current rentals so that you can really see which properties are profitable rentals and which ones aren’t.
Another way that buying an investment property is different from buying a primary residence is financing. What proves difficult for most investors about financing an investment property is the 20% down on the mortgage. A down payment is necessary, but save some money for closing costs, repairs, and other things needed to prepare the rental for the first tenant. So that you can immediately make plans and advances on a rental property that you want, it’s best to always have your financing process started early on.
What to Look For
You have to know what features people are looking for in a rental property. You should already think about the location, size, amenities, and condition of the property and details about the local rental market. Find out who are renting single-family homes and what they tend to look for in a rental home. By researching and talking to rental property experts, real estate agents, and other housing market experts, you will be able to know who your possible renters might be and what kind of property they want.
At last, the search for the bargain begins. To help maximize your monthly cash flows and, eventually, your resale value, rental property investors typically look for properties sold below market value. This means that the property will most likely be older and in need of renovations and repairs. Remember to include these repairs in your operating budget.
How Long Does It Take?
In buying a property, there isn’t a fixed time. Other investors can spend either a few months to a year; it really depends on your process when it comes to investing. The average time to close on a mortgage in 2020 was about 60 days. However, that’s not including the time it takes to search. There are so many things to consider when investing in these kinds of things.
It’s a good idea to avoid rushing the process when it comes to buying your first property. The last thing you want is for you to feel pressured when making an important decision. Each property invested in is a different case; therefore, it takes some time before it can happen. A wise thing to do, though, is to be thorough in your search and inquiry. When you find the right bargain, it will be easier to decide since you already thought it through.
If you are in the market for your first investment property, it’s important for you to have the right people on your team. Why not give Real Property Management Victory a call? Our team of Pelham property managers helps investors determine fair market rent, perform comprehensive assessments on potential rentals, and even help you locate off-market deals. The more you know going into your first deal, the more confidently you can become a successful rental property owner. Contact us today!
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