If you’ve been looking for a stable, long-term investment in Dawsonville, residential rental homes might be the investment you’ve been looking for. In any case, an investment property is different from a residence. To make sure that your first investment property is successful, here are a few things you should take note of. We’ve done the basics for you by listing down the things you should know when buying an investment property. Use this guide to gain confidence when you purchase your first residential rental property.
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.
One very common mistake first-time investors make is to purchase a property they themselves 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. There are some key figures you should be well versed with. These are the fair market value, the fair market rent, and your expected return on investment (ROI). Being able to distinguish the difference in properties in the current rentals of your area will lead you to discover which ones will make for profitable rental properties.
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. 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
You should already know what features most renters want 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. Who are the people who rent single-family homes? Ask yourself, “What would they be 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. Safe to say that this will mean that the property is older and probably in need of renovations and repairs. These repairs need to be reflected in your operating budget.
How Long Does It Take?
There are no deadlines when it comes to buying a property. It will be a case-to-case basis for every investor. Whether it takes a few months to over a year, what’s important is that the decision is thoroughly processed. The average time to close on a mortgage in 2020 was about 60 days, but that’s without the additional days spent on searching which property to invest in. There will be different factors for different people. So, it will vary from person to person.
Do yourself a favor: avoid rushing the process so that you avoid feeling pressured. There’s no set deadline on these kinds of things, especially because they’re big investments. Every property listed is a different scenario. It will take some amount of time to find the right one. A wise thing to do, though, is to be thorough in your search and inquiry. When you find the right bargain, it will be easier to decide since you already thought it through.
If you’re in the market for your first investment property, get yourself a good team of experts. Why not give Real Property Management Stellar a call? Our team of Dawsonville 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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