If you’ve been looking for a stable, long-term investment in Spring Branch, residential rental homes might be the investment you’ve been looking for. In any case, an investment property is different from a residence. There are certain details you need to be aware of so that you can ensure the success of your first investment property. We’ve done the basics for you by listing down the things you should know when buying an investment property. This guide will allow you to make an informed decision when purchasing 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. However, there are a few disparities in buying your primary residence and your rental property.
A typical mistake usually made by first-time investors is to buy a property that they want to live in. This can only lead to a clouding of your judgment because you’re emotionally attached to the property. Instead, investors use a set of calculations and market comparisons to find and evaluate properties to buy. Make sure to keep yourself updated on 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. The 20% down on any mortgage is what most investors find steep about financing an investment property. Make sure to save some cash after making the down payment as you will be in need of closing costs, repairs, and other expenses related to preparing your rental for the first tenant. This is why it’s important to get a head start on the financing process — so that when you come across a rental property that you want, you can immediately make your move.
What to Look For
It’s important that you know what features people want in a rental property. Your planning should include 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 can determine the possible renters you might have and what property they are after.
Then, the bargaining game begins. To help maximize your monthly cash flows and, eventually, your resale value, rental property investors typically look for properties sold below market value. These properties, of course, will be older and in need of renovations and repairs. These repairs need to be reflected in your operating budget.
How Long Does It Take?
Buying a property is a big decision. Don’t rush yourself. Different investors will take any time between a few months to a year — the process of investing is different for everyone. 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.
Give yourself some peace of mind by avoiding rushing the process. When it comes to buying your first property, you don’t want to feel pressured, especially because it’s a big decision! Every property listed is a different scenario. It will take some amount of time to find the right one. However, if you do your due diligence, you will eventually find the right bargain for you, and it will turn out well in the end.
If you are in the market for your first investment property, let our team of experts guide you through the entire process! Why not give Real Property Management West a call? Our team of Spring Branch 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 you can become a successful rental property owner. Contact us today!
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