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Buying Your First Investment Property

Posted by rafael on November 27, 2012 in Small Business

May be you have some saved money, you count with a pre-approved credit in the bank, or you have received an inheritance. Are you thinking about investing in properties to sell them? Investing in real estate has always been one of the options people chose in order to obtain incomes. For instance, it is possible your savings enable you to purchase land for construction, commercial premises, industrial buildings or a complete building for offices, all of them looking like good deals that should return high incomes.

However, the economic benefits of such investments can be affected by numerous factors, such as their geographical location (city, outside the city, countryside, etc.) and accessibility (tourism, main avenues, rural area, urban area, etc.), or even the square meters the property has. Furthermore, approximately since 2009, when the real state sector in the United States fell in crisis, investments in properties are gradually collapsing worldwide.

Nevertheless, all life decisions include risks, and those involving money are no an exception. Thus, if your idea is to create a plan for your future through real estate investments and to obtain incomes without too many headaches, we would like to give and remind you a set of guidelines that are essential for managing your first investment in property.

Take Advantage of Opportunities

The ideal time to invest in real estate depends on several factors, including economics (at national and international level), your specific family situation or even the politics, among others. There is always a possibility to buy a property at a lower value than the real one, if you make the adequate offer to an owner in the exact moment; hence he will see it as an irresistible offer. Real estate prices drop for various reasons, but the main one is the lack of demand.

Nonetheless, there are always properties in some specific areas, that although are not well known for the moment, will increase their value in a near future. A case in point is real estate investments where ventures buy large tracts of land waiting for the city to grow; once several years have passed, these lands become desirable by the market and their price significantly increase.Therefore, it is important to be aware about development plans in the short and medium term in order to correctly identify those areas that will become valuable and take advantage of it.

Location’s Importance          

While it is true that properties in cities, especially downtown, are much more expensive than those located outside cities or countryside, you should think about the fact that there will be not too many people interested in buying later one if they are away from everything. For instance, it is estimated that an over 120 square meters property, located in an area with low population density, is quite more difficult to sell than another smaller in a central area. Since this perspective, a property in any neighborhood of a city will ensure a bigger amount of interested people.

Appropriate Advice

When you are investing, especially large sums of money, nothing can be left to chance.  While it is important to take advantage of opportunities offered by the market, it is also quite valuable to count with the support of legal and real state experts, helping you to ensure a safe and reliable investment. If you are just a neophyte, knowing little about property investments, it is not recommended to venture by yourself, just in order to save some commission payments to experts. You need advice on when to buy, how to get funding and when to sell.

While purchasing a property protects your savings, selling a property will result in additional benefits. Therefore, when mortgages are accessible and cheap enough it is a right time to sell; otherwise, when credit is becoming scarce you better be prepared for a decline in real states sales. It is strongly advisable to buy properties when real state market values just starts rising, and sell them when the market starts lowering its prices. At the same time, trying to speculate with real estate in the short term may be dangerous. Think about it carefully, you can lose your investment just trying to save a significantly less amount of money when hiring specialists.

Wait for the Necessary Time

If you want to make money in a short period of time, investing in a property is not the best option. As several specialized publications report, it is not recommended to sell a property you have just bought without waiting at least for two years. It is not a fad, but a reality. A property needs time as to increase its value; you are dealing with a long term investment, not with a short term one.

Considering Infrastructure and Reforms

Properties are cheaper if they need repairing or reforms, whether houses or apartments. However, sometimes repairing a property can become more expensive than buying a new one in perfect conditions. You may need to invest more money and require further time to guarantee the property a proper state, ready to be sold. Therefore, we suggest you to consult with builders, electricians, contractors, before buying.

Consider Renting Your Property

Nowadays economic situation in most part of the world is not good. Furthermore, banks are increasing their requirements for awarding loans. In other words, circumstances are not good enough for buying properties. Therefore, considering you should wait at least for two years before selling your property, it is not a bad idea to rent it meanwhile. This will guarantee you to receive a monthly income, to avoid paying for services (water, electricity, etc.), and to continue saving for new real state investments.

If you need more information on this issue you can check the links below:

With real estate becoming more affordable and interest rates remaining fairly low, it is a great time to consider putting into an investment property. While financing an investment property is different than a typical residence, since there is more risk to the lender, it can still be a rewarding experience with little to no issues.

An investment property is a long term venture. Finding the right property is vital to success. A first investment does not need to be a mansion or high-end deal. It can be the condo up the street, or a small family home a block over. A ‘go big or go home’ mentality can often lead to failure and leave investors feeling in over their heads. Find a legitimate, beginner home to start an investment career.

Before making a decision on a property, there are a few things to know. When investing in property, there is more than just the building. There is the area and amenities. Consider the neighborhood of the property. Is it a well-known area, and for what? What kinds of people live there? Would they make good tenants? These are all important aspects to think through before making a decision.

Financing an investment property can be a challenging experience. It is a bit different than buying a home to live in. A lender will typically want a 20% down payment, and since it is an investment property, having 6 months of reserve funding is standard. Also, any additional properties, such as a summer home, will require additional months of reserve funding. Having a solid debt to income ratio is also required. When putting money down, be aware of mortgage rates. At times it is possible to make more money by putting less money in then the full amount. Leveraging cash is an important tactic in real estate.

First Investment Property

First Investment Property

Once the financial matters are out of the way, it is time to find tenants. As stated before, finding the right neighborhood can naturally weed out some poor candidates. It is imperative to find good tenants because they are the ones who essentially take care of the property. Day to day wear and tear can be cruel on a property, but with good tenants, there may be little to no damage at all. When a potential candidate comes by, take a moment to notice how they care for their car. If there is week old trash everywhere, they might not be the best candidate. Also, be wary of tenants who are available to move in immediately. Traditionally they are not the best tenants in the world, and may not treat the property well. In the end, find a good stable tenant to treat the property with respect.

If the right steps are taken, investing in real estate property can be an exciting, worthwhile experience. Be sure to do thorough research and find the right fit for a first real estate investment.

Andrew Yessen is a blogger for We Buy Ugly Houses, America’s #1 home buyer. If you need to sell your house quickly, check out our site for more information.

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