So you’re getting the bug to invest in real estate? No, not just in your own home, but one you’ll manage, rent out and maybe sell for a profit. It’s no secret that this is the way a lot of upwardly mobile people started out, building on the proceeds they accumulated with that first investment home, condo or apartment and suddenly calling themselves landlords.
The good news is that rentals are in demand. Crazy in demand. “With the economy as it is, many people are finding it hard to buy their own homes despite having full-time jobs,” says NuwireInvestor’s Millie Sitzer, who adds that young adults ages 25-35, find it hard to own homes because they often find it difficult to save enough for a downpayment for their home after paying their student loans. “In fact, the number of people renting houses has increased to 36.6 percent in 2016.” It’s 2020, and that number is even higher now.
Sitzer offers some tips on what to look for if you are in the position of buying an investment property. The first is, of course, location. “The location often dictates the price and target market for the property that you are buying,” she says, citing how an ideal spot is one that would appeal to young, striving professionals or a young family. Look for properties close to the hustle and bustle of the city so that they can be closer to where they work and close to places where they can socialize with their peers.
Financially speaking, get your debt to income ratio, credit score, and other financial metrics into good shape before considering this at all. Buying an investment property requires a 10 to 20 percent down payment, and interest rates for non-owner occupied properties are slightly higher in general. That means finding an excellent loan professional to help you through this. If you plan on buying something that needs work, add that budget on top of your downpayment in your head, but remember that the lender may still require you to show some seasoned funds in the bank. Cosmetic fixes can usually be done fairly inexpensively, such as new carpet, paint, and appliances.
Check crime rates as well as the Megan’s Law database for any negative activity in the neighborhood, along with abandoned buildings and vacant lots. Living in a beautiful space means little when your renter is afraid to go outside. You can go to city hall to see what else is planned for the area as well. Close proximity to a great coffee shop is golden.
The property you choose should have some appeal or charm. Make sure the aesthetics of the property jives with your target market as well as the neighborhood surrounding it. That includes checking out the facilities and amenities of the property to see if there is room for upgrades. Is there an HOA? How has the building been managed? Are their lawsuits against the HOA? Jump in with both eyes open.
“The most important factor to look for in buying an investment property is the property’s capability to make a profit and increase its value,” says Sitzer. “Although you won’t be able to predict the future, you can make an educated guess and see if a certain location can be further developed or not. This should guide you in choosing a property that can give you a profit in your capital expense from buying the property.”
Source: TBWS
