Are you planning to buy an investment property? A lot of people have made a lot of money by investing in real estate, especially investment properties. So, there are plenty of reasons to agree that real estate is a sound investment. However, top realtors in San Antonio believe that before you invest your hard-earned money, it is better to be well-versed and have complete information on how the real estate market functions.
Here are a few things you must consider when buying an investment property –
What is an investment property?
Any property purchased to generate an income is said to be an investment property. The income is generated via the rents received or market appreciation. The properties are generally bought by a single investor or many investors.
You are ready to get your investment properties if you checklist the following pointers
You do not have any personal debt left
As a repeated investor, you might be having debts from the past. But before you plan on buying your next investment property, make sure you have all your past debts cleared. Also, if you have any unpaid medical bills or children who are planning to go to college soon, then purchasing an investment property should not be your top priority.
Being cautious is the key here. Do not put yourself in a situation where you have less cash and increased debt.
You have enough money to secure a down payment
Investment properties need a larger down payment than your pre-occupied property. You generally need a 20% down payment. For that, you can get the down payment money from the bank such as a personal loan. You can even invest in the real estate market through bitcoin.
When you have found the right location
Your investment is a hit or a miss based on the location you choose. The last thing you want is to be stuck with a property in an area where the rates are declining. A potential investment opportunity is where the population of that area is increasing and a revitalization plan is underway.
The best location for a profitable rental property is the one where there are low property taxes, decent school districts, plenty of public amenities like – parks, malls, theaters, etc. Also, a neighborhood with low crime rates, access to public transport, and a growing job market will attract quality renters.
Higher interest rates
The cost of borrowing money may be cheap in 2020, but the interest rate is much higher than your traditional mortgage interest rate. If you decide on financing your purchase, go for a low mortgage payment that will not eat your monthly profits too much.
Consider investing in Landlord Insurance
Consider getting landlord insurance for our new investment. This type of insurance covers your property damage, lost rental income, Liability Protection (in case the tenant suffers from an injury because of property maintenance issues). Additional coverage by landlord insurance is – Guaranteed Income Insurance, Emergency Coverage, Additional Construction Expenses, Flood Insurance, etc.
Factor in the unexpected costs
Apart from the maintenance and the upkeep costs, there is always a chance of an emergency that may crop up. For example – roof damage, pipes bursting, kitchen damage, etc. therefore, you must plan to keep aside at least 20 to 30% of your rental income for such costs so you are left with enough funds if such a situation arises.
Avoid a Fixer-Upper
According to the realtors in San Antonio, you must not be tempted to look for a house that is available at a bargain price that can later be flipped. If it is your first time investing in real estate, you must avoid it for now. If you have a contractor who does quality work for cheap or if you are skilled at large-scale home improvements, you are most likely to pay a lot of money for renovation. Better, look for a home that is priced below the market rates and needs minor repairs.
Determine Your Returns
After all the hard-earned money that you have invested, what are your returns on that? Stocks generally offer 7.5% returns whereas bonds pay 5%. A healthy real estate investment gives around 6% returns during the first year, which gradually rises over time.
Hire a Property Management Company
Handling property repairs, tenant management, and maintenance all by yourself is not an easy task. Hiring a property management company will ease the process. Property management companies handle the maintenance task on your behalf. They also make sure that the property is in top-notch condition and well maintained. They will also collect the rent on your behalf of you. Thus, it is wise to take their help.
A final word
Are you ready to take the next step forward in owning your investment property? If yes, then you should start researching the available properties in your area. There are a few other ways to see if you are ready. Like – Know your financial stability, returns on your investment and also see whether if you have the time to manage so many things all by yourself. You also need to consider the housing market, property taxes and hiring a property management company.
Work with a top realtor in San Antonio who will provide you the required help on your journey to buy an investment property. San Antonio real estate can help you navigate the down payment options, preapproval, and so on.
