Before the purchase of your first single-family rental home, do yourself the favor of setting clearly-defined end goals. One important detail that you need to go over before you search for property is the different qualities found in investment properties. A few of these might be properties in a certain area, with a specific number of bedrooms, or minimum square footage. By knowing the specifics, you can refine your search criteria and locate potential properties faster.
Besides knowing what qualities you want, it is important to be financially prepared to purchase an investment property. Based on the recommendations of industry experts, it is a good idea to resolve any personal debts and save up for a down payment, before proceeding to property search. To qualify for more favorable loan rates, reduce your personal debts. Remember, all mortgage loans for an investment property will require a 20% down payment. Advanced financing is commendable but always double-check on those high-interest loans or mortgage products that seem a little too good to be true. By prequalifying with a reputable mortgage lender, you will be ready to seize the investment opportunities as they arrive. By making financial readiness a priority, you can more confidently buy that rental property when the time comes.
Act upon these important preliminary steps and then you can begin searching for the right property. A key detail to searching for an investment property is to run a series of numbers on each prospective property, including your margins, operating expenses, and expected return. New investors tend to fall into the trap of making this mistake.
New investors sometimes forget to include all of the expenses related to purchasing and preparing the rental property for lease, as well as ongoing property management, maintenance, and vacancy costs. Industry experts suggest a margin goal of 10% and a 6% return in your first year means that you have a profitable investment.
In conclusion, never forget that there are other important things in life aside from investment property. Remember, when all is said and done, it is only an investment. Getting attached to a particular property or allowing emotions to guide your decisions is not a good idea. Also, the property you buy is not necessarily a property that you would ever live in yourself. For your first investment, industry experts recommend opting for low-cost properties in high-demand areas. However, stay away from fixer-uppers. If you aren’t into the home remodeling business, and you have no connections to a quality contractor who will do the work for less than the going rate, it’s best to avoid them. The objective is for you to launch into a long and profitable investment career through the acquisition of your first single-family rental property. Through this, your investment properties remain profitable, while you stay on track.
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