Investment properties are not for the faint of heart. They require a lot of time, patience, dedication, and business acumen to manage—especially if you plan to own multiple properties.
Before you begin the process of looking for and purchasing an investment property, consider these essential tips:
If you have debts like student loans or unpaid medical bills, it is highly recommended to pay these off as much as possible first. That way, you are more financially secure and don’t have to worry about excess debt.
Start with a small investment property such as a cheaper property in a good area. This will help you establish yourself and unless you’re experienced, avoid fixer uppers. You may put more money into updating the property than you can afford.
As an investor, you will not be able to get mortgage insurance so expect to pay a large down payment on the property.
If you do not rent out the home to renter for some period of time, your overall ROI will be lower. So make sure that you are prepared for an inconsistent income.
Will you be able to take calls at 3 a.m. for a tenant emergency or evict a bad tenant?
If not, becoming a lessor may not be for you and you should probably hire an experienced property manager or consider a real estate investment trust (REIT). This is a private or publically held company that owns and operates investment properties and you essentially buy a share in them. When rent is collected on the properties in your portfolio, you get a portion of that income as a dividend.
If you do decide to hire a property manager to manage your properties make sure that they are experienced and someone you can trust.
Before you invest in an investment property you need to talk to your financial advisor and CPA first. They will work with you to determine if such a move is appropriate and financially feasible for you.
Always weigh the pros and cons of investing in a property before you buy.
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