Buying an investment property is a great way to earn extra income and build long-term wealth. However, there are many considerations that go into buying your first investment property, especially in the current real estate market.
6. Plan For The Future
Each investment property should add value to your big picture strategy and get you closer to your end goal. One key aspect to consider is how to weather any potential recession since you will only recognize an actual loss if/when you are forced to sell property.
Purchasing in an area's median price range can be a safe bet, and a quick search can help you determine average rent to cover expenses.
7. Consider Target ROI
When purchasing your first rental property, don't be tempted to buy a property that doesn't have cash flow. As exciting as our current market is, with properties appreciating at a breakneck pace, don't ignore the fundamentals of real estate investing. When rental property hunting, look for a target ROI of 15% or more and target rents should equal at least 3% of the purchase price.
8. Consider Your Cash Flow
The best advice I ever got was, "If the market were to tank tomorrow and you are still happy you own the property, then you have the right property." How you do this is by making sure that the investment has a good positive cash flow. This way you are still paying down principle, still have cash flow, and still getting the benefits of the property. Therefore, you don't mind a price decrease.
9. Leverage Auction Websites
Consider looking at auction sites. We anticipate seeing online sites rise as a way for buyers and investors to discover and research properties more easily. For investors looking at the burgeoning single-family residential market, online auctions allow them to bid remotely, reduce travel costs and expand options with virtual access to properties worldwide.
10. Know There Are No Perfect Deals
Determine your investment criteria, do your due diligence and then pull the trigger. There are no perfect deals, and what is right (or wrong) for a different investor shouldn't matter to you. You don't need a home-run on your first deal and if you never get in the market, you won't have an opportunity to learn.
Be bold and fearless, and take that first big step!
Comments