If you’ve been looking for a stable, long-term investment in Liberty Lake, residential rental homes might be the investment you’ve been looking for. Nevertheless, acquiring an investment property is not the same as buying a residence. You will need to go over a few things so that you can make sure that your first investment property is a success. To kick things off, here are the basics of 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. There are, however, differences between buying a primary residence and a rental property.
It’s not unusual for first-time investors to make the mistake of looking for a house that they personally want to live in. This typically leads to an emotional attachment to the house, which is not at all a good thing; especially when it’s a property you want to rent out. Instead, investors use a set of calculations and market comparisons to find and evaluate properties to buy. Keep track of the fair market value, the fair market rent, and your expected return on investment (ROI). These are significant details you need to be keeping an eye on. Going through the different properties amongst the current rentals, you will be able to see which properties make for profitable ones, versus those that don’t.
Another way that buying an investment property is different from buying a primary residence is financing. What proves difficult for most investors about financing an investment property is the 20% down on the mortgage. Aside from the down payment, you will need cash for closing costs and repairs — any cost that relates to preparing the rental for your first tenant. It’s very important for you to begin your financing process early so that you can immediately process a rental property once you set your eyes on one!
What to Look For
You have to know what features people are looking for in a rental property. Your planning should include the location, size, amenities, and condition of the property and details about the local rental market. Find out who are renting single-family homes and what they tend to look for in a rental home. By researching and talking to rental property experts, real estate agents, and other housing market experts, you can get a picture of what kind of renters you might be having and what kind of property they are looking for.
This begins the journey for the next bargain. To help maximize your monthly cash flows and, eventually, your resale value, rental property investors typically look for properties sold below market value. It’s very likely that these properties will be older and in need of renovations and repairs. When planning your operating budget, remember to include these repairs.
How Long Does It Take?
There’s no set time period when it comes to buying a property. It may take you a few months, while other investors could take years. It all depends on how fast you want to pace yourself. The average time to close on a mortgage in 2020 was about 60 days, plus added days spent on looking for the right property. The process looks different for everyone since there are so many things to consider when investing in a property.
It’s wise to not set a deadline for yourself. Why? This way, you can avoid rushing the process and avoid feeling pressured to buy your first property. Because each property is not the same, it will take some time before you find the right one for you. 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, it’s important for you to have the right people on your team. Why not give Real Property Management Spokane County a call? Our team of Liberty Lake 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 confidently you can become a successful rental property owner. Contact us today!
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