If you’re looking to invest and would like to see exactly where your money is going, real estate investment is definitely for you. It’s a great way to have control of your funds and literally see them growing. If you’re interested in investing in property here are 6 tips to get you started.
If you already have quite a bit of debt because of school or medical bills then you might want to take care of that before going more into debt by purchasing a rental property. Always make sure you have a margin of safety. You have to ask yourself if you’re ready to take on more costs with property investment and still meet your other financial obligations.
The down payment on your rental property might be a little higher than you initially expected. According to Investopedia, most rental properties require a downpayment of at least 20 percent since mortgage insurance isn’t available on rental properties. So just make sure you do your research to prepare yourself for the upfront costs.
It can be so tempting to buy a fixer-upper because they are usually cheap, and it can be easy to get carried away with your hopes and dreams for a property. Just remember that you eventually want to make money on this property. It is an investment. Will you be able to easily earn back what you’re going to have to spend on it?
When looking for a property remember to keep location in mind. The type of area you choose will determine the kind of tenants you will have. Choosing an area with low property tax is always a good idea. Consider what is near the property. If you’re wanting to rent to families then pick a property that is near a good school district with low crime rates. Many people like having amenities like parks, malls, and restaurants, so that’s a good thing to keep in mind as well.
Always keep in mind that once you have a property it will take upkeep from you. Either you’ll need to be willing to strap on the tool belt and fix problems or hire a property manager to help you with that maintenance. When deciding how much to charge in rent just remember that all of the rent isn’t profit. Between 35 to 80 percent of your gross operating income will go towards operating expenses.
Not sure what you’re doing? You are not alone. Before you go spending hundreds or even thousands of dollars for classes that tell you how to invest in real estate take a look at your free options first. Forbes suggests looking at the book The ABC’s of Real Estate Investing by Ken Mcelroy to get you started.
Hopefully, this list helped to get your wheels turning on where you can begin your investments. Don’t feel like you need to be in a rush to scoop up a property. Take the time to find what is right for you in your situation so you can be happy with your investment for years to come.