Ask any successful investor and he’ll tell you that property is one of the safest forms of investment. But how can the average American purchase an investment property? The process can be a little daunting in the beginning, so we’ve created this guide to help get you started!
Create A Business Plan
Before opening your browser and searching for properties in the area, it’s crucial to make a detailed business plan. Establish a long-term goal; some individuals want to sell down the line and make a $50,000 profit, while others want the property to serve as an inheritance to their children or loved ones.
Look For A Partner
To reduce the financial risk, some individuals tend to seek out a partner. This is an excellent option for first-time buyers who don’t have any experience in the realm of property investment. It can also be beneficial for individuals who are cash-strapped and can’t afford the full 20% down payment.
Get A Pre-Approved Mortgage
Since we’re on the subject of money, it’s crucial to get a pre-approved mortgage through a reputable financial institution. The bank will analyze your current financial situation and tell you how much they’re willing to loan you. Once you’re pre-approved, you can start searching for the perfect property investment.
Take your time to carefully research different neighborhoods, and look at properties that are close to schools and public transport hubs. These homes tend to be more attractive, and will likely help your property appreciate over time.
If you’re planning on renting out your investment, be prepared to deal with tenants. As the landlord, you’re responsible for all repairs and maintenance of the property. If you want to generate a profit, set the rent at a rate that covers both your monthly mortgage payment and the property tax. If you’re not good with numbers, sit down with your financial advisor or an accountant and determine a figure that ensures you won’t go into debt by buying this property.
Furthermore, you should work with a professional real estate agent who has insights on appreciation values. For example, an agent can help you during the negotiation period because they know how much the house next door sold for, giving you the upper hand during the negotiation period.
Real estate is a substantial investment, and it requires a long-term strategy. If you’re thinking about buying an investment property, follow our guide before starting this exciting journey.