If you’ve been looking for a stable, long-term investment in Burlington, residential rental homes might be the investment you’ve been looking for. Nonetheless, an investment property is not necessarily the same as a residence. There are certain details you need to be aware of so that you can ensure the success of your first investment property. Here are the basics that you need to know about buying investment properties. Buying your first residential rental property won’t be as intimidating when you have a guide like this.
How It Works
The concept of buying an investment property is a pretty straightforward one: investors purchase a property with the intent to lease it to a tenant. This buy-and-hold model is one of the most common ways that real estate investors start their property portfolios. However, there are a few disparities in buying your primary residence and your rental property.
A common mistake for first-time investors is this: look for a house and then decide to want to live in it. This is a bad idea since being emotionally attached to the house can cause problems for future transactions. Instead, investors use a set of calculations and market comparisons to find and evaluate properties to buy. A few things you’ll need to be aware of include the fair market value, the fair market rent, and your expected return on investment (ROI). By looking at the different properties in the current rentals, you will be able to distinguish which properties will make for profitable rentals.
Another way that buying an investment property is different from buying a primary residence is financing. The 20% down on any mortgage is what most investors find steep about financing an investment property. Make sure to save some cash after making the down payment as you will be in need of closing costs, repairs, and other expenses related to preparing your rental for the first tenant. So that you can immediately make plans and advances on a rental property that you want, it’s best to always have your financing process started early on.
What to Look For
It’s best for you to determine what features the market wants in a rental property. Know what the people are looking for — the location, size, amenities, and condition of the property and details about the local rental market. Research on the kind of people who rent single-family rental homes and try to find out what they look for in a rental home. By researching and talking to rental property experts, real estate agents, and other housing market experts, you can get an idea of who might want to rent your property.
At last, the search for the bargain begins. To help maximize your monthly cash flows and, eventually, your resale value, rental property investors typically look for properties sold below market value. It’s a given, then, that the property is older and in need of renovations and repairs. Make sure you take these repairs into account when planning your operating budget.
How Long Does It Take?
Because it’s different for everyone, there is no set time for buying a property. If it takes you a few months or a few years, then go with that. Take your time because you don’t want to end up with any regrets. The average time to close on a mortgage in 2020 was about 60 days, and that’s not even including the time spent looking for the property. You have to factor in a lot of variables; that’s why it’s different for everyone.
Give yourself some peace of mind by avoiding rushing the process. When it comes to buying your first property, you don’t want to feel pressured, especially because it’s a big decision! While every property will take time, you can make use of that by really going through your options and finding which one suits your needs. Regardless, make sure that you do your part, as well. Do your homework and you will find the right bargain for yourself in no time!
If you are in the market for your first investment property, getting the right team is a key decision! Why not give Real Property Management Sterling a call? Our team of Burlington property managers helps investors determine fair market rent, perform comprehensive assessments on potential rentals, and even help you locate off-market deals. The more you know going into your first deal, the more you can become a successful rental property owner. Contact us today!
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