Buying and operating an investment property can be a fun, rewarding way to utilize your time and money. If you are just getting into the property investment game, there are likely a few things you don’t know yet. From those with experience, here are 4 quick tips for first-time investment property buyers.
Prepare to Place Significant Down Payment
Investment properties generally have stricter approval requirements than owner-occupied properties. Since mortgage insurance is not applicable for investment properties, buyers are required to have at least a 20 percent down payment in order to get traditional financing. As you prepare to purchase your first investment property, make sure you have sufficient funds for a significant down payment, keeping in mind that you may still need to pay for repairs or updates before the property is rental-ready.
Avoid Buying a Fixer Upper
Purchasing a “fixer upper” home can be a great investment opportunity – when it is right for you. If you are buying your very first investment property, it might be best to avoid homes that need a significant amount of work. Unless you are highly skilled in home improvement work or have connections to cheap contracting work, the needed repairs and renovations will likely cost more than you think. It will likely be far more beneficial to you and your investment strategy to purchase a home that’s priced below market and needs minimal to no repairs.
Look for a Lower Cost Property
Especially if it is your first time buying an investment property, it is important to start small. Although you do want to avoid properties that need too many renovations, it’s still a good idea to begin with a lower cost property such as a condo, townhome, apartment, or smaller house. Since it’s your first investment property, you might want to keep your risk low in case you do not earn the payoff you think you will.
Find a Realtor Who Knows Investment Property
Nothing can make life smoother than this. By working with a real estate agent who has experience in helping people purchase property specifically for investment, you will have the guidance you need to make smarter decisions. The Starling Davis Group counts investment properties as one of our specialties, so reach out to us today to get started looking for yours!