Jason Falcon is living proof that purchasing your first investment property is a huge decision that will have an impact on your life and finances for years to come. As a successful investor he knows first hand it’s definitely exciting, but there’s information that you need to set yourself up for long-term success and make the process of buying and owning investment property as easy (and profitable) as possible.
Before you take the leap into property ownership, there are a few things you’ll want to straighten out.
Why Should You Consider Buying Real Estate Investments?
Real estate is one of the most attractive investment opportunities out there for two reasons: immediate cash flow and appreciation. In other words, real estate investments make you money in both the short term (through the cash generated by renting out the property) and the long term (through the property appreciating in value over time).
It’s also an excellent time to purchase real estate. The housing market has shown significant recovery from the 2008 housing crisis, prices are rising and interest rates are low. So if you’ve been thinking about buying your first real estate investment property, now would be a good time to do it.
But before you run to the bank and put in an offer, it’s important to note that buying your first real estate investment property shouldn’t be taken lightly. To get the most out of owning and renting property, you need to be in the right place to do it and have a clear idea of what you’re getting into.
Here’s a few important questions that you’ll want to ask yourself before you invest in your first property to make sure you’re as prepared as possible:
1. Am I Financially Ready to Buy?
The first thing you’ll want to check is whether you can truly afford it. Review your finances – purchasing your first investment property is almost always a more expensive process than you expect, and you want to make sure you have the capital to cover any repairs you’ll need to make before you can start renting or to cover your mortgage if finding a tenant takes longer than you thought it would.
You’ll also want to look at the market. What are properties renting for in the area, and how does that compare with your monthly costs of ownership? Ideally, you want to purchase a home at a relatively low cost but have the rental market be healthy enough that it enables you to turn a profit.
2. Can I Handle Being a Landlord?
Being a landlord isn’t for everyone. You have to be available at all times for any issues that come up for your tenants. Before you buy, you should decide if being a landlord is right for you and, if not, look into hiring a property management company to deal with it for you.
3. What’s the Neighborhood Like?
Like the old saying goes, it’s all about location, location, location. Even if you find the perfect house or apartment building, if it’s not in a desirable neighborhood, it’s not a solid investment.
Take a look at the neighborhood and the quality of life it can offer your tenants. Is there an excellent school system? Are there plenty of shops and restaurants in walking distance? Is the street quiet and peaceful? All those things will play a serious part in your ability to rent your property and where you can set your rent.
4. Who’s Your Ideal Tenant?
Before you buy a place, you should know your ideal tenant. That way, you can purchase a property that will be attractive to your target renter. The features that appeal to a growing family will be vastly different to renters from the local university and, depending on who you want to rent to, you’ll want to look at property with features that will suit them best.
5. How Much Work Needs to Be Done on the Property Before I Can Rent It?
Before you commit to a property, it’s important to know the amount of work you’ll need to do before tenants can move in. The more work that needs to be done, the more capital you’ll need to have up front to cover the renovation costs and your mortgage. Check this out: 7 Questions To Ask A Remodeling Contractor
6. How Often Can I Visit the Property?
If you’re investing in a property that requires travel, you need to know how often you can realistically get out and visit it once you have tenants living there. Ideally, you’ll want to visit often; while the majority of tenants will treat your property with respect, many people definitely won’t. Visiting often can keep your property from accruing too much damage from bad tenants.
7. Have I Done All My Research?
Buying your first investment property is incredibly exciting, but don’t make the mistake of not doing your due diligence before you invest. Ask yourself these seven questions, and get clarity on exactly what you need and how to make it happen. That way, when you finally do purchase, you’ll know it’s the right decision for you (and your bank account).
Today’s Investing Post is credited to Jason Falcon, who is the owner of LEAP Property Management, a full-service property management company in Denton, TX. You can follow Jason’s property management blog here.