Investing in real estate can present a big risk for the investor; but, if done right, can provide a significant financial return. Thinking about purchasing an investment property is one thing, but signing the paperwork is another. So, before signing any paperwork, here are seven tips to consider before purchasing an investment property:
Big Down Payment – Unlike residential properties, investment properties require a 20 percent down payment to get traditional financing. To get a great mortgage rate, consider putting more money down up-front. Reducing your monthly payments may make owning an investment property less stressful month-to-month.
Taxes – Always consider property taxes when purchasing a home for investment purposes. The taxes could go up if you intend to own the home over a long period.
Unreliable Income – While the investment income is steady when the property is rented, it isn’t when the home is vacant. Make sure you have enough saved up in case your investment property goes through a dry-spell or needs significant repairs before it is rented to its first tenant.
Repairs – Investment properties will always require some maintenance throughout the years. If you do not intend to hire a property manager, make sure you are up to repairing maintenance issues throughout the years. Current
Property Condition – When purchasing a home as an investment property try not to take on too much! Look at the present state of the home and determine if you can repair its existing maintenance issues. You don’t want to buy the home and then have to gut and renovate several rooms of the house completely. Fixer-uppers can be a money pit!
Consider a Real Estate Investment Trust – Instead of taking on the entire financial burden of an investment property, consider investing in a real estate investment trust (REIT). According to U.S. News, REITs are privately or publicly held companies that use investors’ money to buy and lease real estate. Also, these typically offer better and more reliable monthly returns.
Consider Hiring a Property Management Team – Investment properties can be a lot of work! But, if real estate is where you want to invest your money, consider hiring a property management team to take on the majority of the work associated with your property. Property management companies will handle everything from finding tenants to collecting rent checks to handling all maintenance requests. They are a lifesaver when it comes to owning an investment property.
Do you have any questions about purchasing an investment company? Or, are you looking for a property management team in the Austin area? Give TALK Property Management a call. We would love to answer any questions you may have!