Investment Properties And All That Comes With Having One
For most people, having an investment property seems like a solid idea. You purchase a house, rent it out, and make a little money; and it adds some diversity to your investments besides just the stock market and mutual funds. Most people who are interested in buying an investment property don’t look past the initial investment.
- First things first, can you financially take on an investment?
Before you dive into an investment property, sit down and make sure that you are financially stable enough to make this kind of decision. Ask yourself if your income is steady enough and if you have a large enough emergency fund.
- Have you planned on a bigger down payment than you are used to?
Since there isn't mortgage insurance for investment properties, expect to put down a 20 percent down payment to get traditional financing. Putting down even more can get you a better rate and loan costs are generally higher for investment properties.
- Are you handy? Can you fix things?
If you go the landlord route, then you should expect your tenants to call you when there is an issue with the house or any appliances in the house. Make sure you have enough saved up to replace any appliances or make any necessary repairs to the home while it is occupied. Many landlords contract with local handymen or home warranty companies to help with these costs.
- Do you have a steady income in addition to the investment properties?
Tenants come and go and some properties take a while for new tenants to move in. You need to be able to cover the bills and the mortgage while it is not being occupied by any tenants.
- Beware of the ‘fixer upper’ properties.
If you are new to investing and see a fixer upper property that you think would be the perfect investment, make sure it’s not more than you can handle. If you have the skills for a large home improvement or know someone that can help, more power to you, but those that don’t it is not worth the risk. A better option is to look for properties that only need minor repairs.
- Choose your investment partners wisely.
If you can’t afford an investment properties, it might be a good idea to go into the investment with a partner, but don’t just pick any ol' partner. Pick a partner you are comfortable doing business with, but also comfortable with the agreement that you have between the two of you regarding your investment.
- Determine your return.
For every dollar you invest in this property, determine what your return is. A 6 percent return in the first year of being a landlord is considered an healthy return and that number should rise over time.
- Find the right agent for you.
Find someone that is on your side and doesn’t just see you as potential commission. Find an agent that cares about what you are looking for, who is interested in establishing a relationship, and specializes in rental properties and even owns a rental property themselves.
Interested in an investment property? Contact us and The Fairfield Team would love to help you find the perfect property for you!