If you’ve been looking for a stable, long-term investment in Lutz, residential rental homes might be the investment you’ve been looking for. However, buying an investment property is not the same as buying a residence. There are a few key details to know in order to ensure the success of your first investment property. To give you a head start, we’ve listed down 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. Buying a primary residence is not the same as buying a rental property, though; there are a few differences.
First-time investors usually fall for the mistake of wanting to live in the property that they want to invest in. This typically leads to an emotional attachment to the house, which is not at all a good thing; especially when it’s a property you want to rent out. Instead, investors use a set of calculations and market comparisons to find and evaluate properties to buy. Keep track of the fair market value, the fair market rent, and your expected return on investment (ROI). These are significant details you need to be keeping an eye on. You can compare the different properties in the current rentals so that you can really see which properties are profitable rentals and which ones aren’t.
Another way that buying an investment property is different from buying a primary residence is financing. What proves difficult for most investors about financing an investment property is the 20% down on the mortgage. A down payment is necessary, but save some money for closing costs, repairs, and other things needed to prepare the rental for the first tenant. It’s best to have your financing process already started, so that when you spot a rental property that you want, you can move in quickly.
What to Look For
It’s best for you to determine what features the market wants in a rental property. For example, you should know what they want 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 will be able to know who your possible renters might be and what kind of property they want.
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. Remember to include these repairs in your operating budget.
How Long Does It Take?
Because it’s different for everyone, there is no set time for buying a property. If it takes you a few months or a few years, then go with that. Take your time because you don’t want to end up with any regrets. The average time to close on a mortgage in 2020 was about 60 days. However, that’s not including the time it takes to search. There are so many things to consider when investing in these kinds of things.
It’s important to note that you should avoid rushing the process because you feel pressured to buy your first property. This often happens when you set a personal deadline. Each property invested in is a different case; therefore, it takes some time before it can happen. 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’re in the market for your first investment property, get yourself a good team of experts. Why not give Real Property Management Freedom a call? Our team of Lutz 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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