If you’ve been looking for a stable, long-term investment in Southport, residential rental homes might be the investment you’ve been looking for. In any case, an investment property is different from a residence. There are certain details you need to be aware of so that you can ensure the success of your first investment property. Let’s get the ball rolling with the basics of buying an investment property. 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. There are, however, differences between buying a primary residence and a rental property.
It’s not unusual for first-time investors to make the mistake of looking for a house that they personally want to live in. This is unwise because being emotionally attached to a particular house can create personal bias and cloud judgment. 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). Going through the different properties amongst the current rentals, you will be able to see which properties make for profitable ones, versus those that don’t.
Another way that buying an investment property is different from buying a primary residence is financing. It can be challenging to finance an investment property since many lenders will require a 20% down on the mortgage. Aside from the down payment, you will need cash for closing costs and repairs — any cost that relates to preparing the rental for your first tenant. Hence, starting the financing process early will lead to a better chance of you being able to move quickly when you see a rental property that you want.
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. Determine what kind of people are looking for single-family homes, and what they are looking 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.
Finally, you can start looking for a bargain. 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?
Buying a property is a big decision. Don’t rush yourself. It may take you a few months, while other investors could take years. It all depends on how fast you want to pace yourself. The average time to close on a mortgage in 2020 was about 60 days; but, that’s just the closing — not including the days spent on searching for the right property. There will be different factors for different people. So, it will vary from person to person.
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! Don’t worry; every property has its own pace and timing. Give it some time, and you will eventually find the right one for you. 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, let our team of experts guide you through the entire process! Why not give Real Property Management Champion a call? Our team of Southport 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 confidently you can become a successful rental property owner. Contact us today!
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