Did you know that real estate is the source of wealth for 90% of all millionaires? The thought of buying an investment property to grow money seems fantastic, but there are a few things to consider when getting started.
Make sure you’re ready to take on the role of landlord. You’ll be the one your renter’s contact when items break, flood, leak, or fall. Do you think you’ll be able to manage repairs and maintenance on your own? Or are you going to hire a contractor? Take into account the possibility of employing a property manager. You won’t be the one who gets the call at 1 a.m. that the furnace is broken, but it comes at a price.
MONTHLY EARNINGS ARE AMAZING, RIGHT?
Those monthly checks in the mailbox or deposits into a bank account can be life-changing if your property is in good condition and the renter is dependable. The disadvantage is that tenants can be demanding and do not always treat your property as if it were their own. Remember to account for typical wear and tear as well as the possibility of damage when a renter vacates. Carpets will need to be cleaned and walls painted at least, but you should also budget for additional improvements and repairs. When a lease comes to an end, make sure you factor vacancy into the equation. You must continue to make monthly mortgage payments even if the property is vacant for a period of time.
BEWARE OF RENTAL RESTRICTIONS:
Companies like Airbnb and VRBO have become so popular that several municipalities have enacted short-term rental regulations. That is something to consider while looking for a place to buy a home. A property on a recreational lake, for example, may be very profitable as a short-term rental but check with the city or county for any limitations. If you’re thinking about buying a home with a Homeowners Association (HOA), bear in mind that some HOAs have rental limitations or limits.
ASSURANCE OF A DOWN PAYMENT:
A big down payment is required to acquire an investment property. Private Mortgage Insurance (PMI) is not available on rental properties, therefore you’ll need at least a 20% down payment. There are other innovative choices if you don’t have the funds or credit for standard financings, such as seller financing, bringing in an investment partner, taking out a home equity line of credit, or taking out a hard money loan.
Working with the correct real estate agent and mortgage broker who are familiar with current market circumstances and your specific needs may be incredibly useful. For the first-time (or seasoned) investor, a certified Realtor® with a love for investment properties may be an invaluable resource. Starting a real estate investment portfolio is an exciting trip that you do not want to go on alone. From the beginning, work with an expert Realtor® like Avenue5 International, mortgage broker, attorney, and/or tax specialist.