There are many reasons to believe that property is a sound investment. Just look at some of the world’s wealthiest people real estate has produced. Just like any investment, it is a good idea to be well-versed before diving in with hundreds of thousands of dollars. Understanding as much information as possible will only help you start a new career as a real estate tycoon.
Make Sure it’s for you
How are you at repairing drywall or unclogging a toilet? Do you know your way around a toolbox? If you are shaking your head no to these questions, then you may want to reconsider. Of course, you could call someone to take care of all these matters for you, but this will just eat into your profits. Property owners who own one or two homes often do their own repairs to save money. If you are not the handy type and you don’t have a lot of cash to spare, being a landlord may not be the right fit for you.
As opposed to owner-occupied properties, investment properties typically have a much larger down payment, so they have more stringent approval requirements. For example, if you put 3 percent down on the home you currently live in, this will not be the same for an investment property. Mortgage insurance is not available on rental properties, so you will need 20 percent.
Higher Interest Rates
If you look to borrow money now, it may be cheap. However, this isn’t the same for the interest rate on an investment property. It will be higher than traditional mortgage rates. It is important to remember, you want a mortgage rate that’s low enough so that it won’t eat into your monthly profits too significantly.
You’ll want to look for low property taxes in a decent school district, a neighborhood with low crime rates, an area with a growing job market and plenty of amenities. Some amenities include parks, malls, restaurants and movie theaters. You also want to keep in mind the driving distance for you. If you have to visit the property regularly to check in on it or do maintenance, you want it to be within a reasonable driving distance.