Now that you’ve found the perfect investment property, it’s time to put in an offer and make your dream home a reality! But before you write that check, there are several important things to consider about the property’s future value and whether it’s worth your hard-earned money. Take the following tips into consideration when searching for your next investment property, and you’ll have less trouble with buyers’ remorse down the road.
How long do you want to be invested in this property?
If you’re planning to live in a property, consider how long you expect to own it. If there are any major renovations, consider how long it might take to recoup your investment by raising rents or reselling. This is especially true if you’re dealing with an older property that may need work.
What are your ideal investment metrics (rental income, growth potential, etc.)?
Knowing what you want out of an investment property is crucial to purchasing a home that will offer you a solid return on your investment. The more time you spend researching and planning, the less likely it is that you’ll end up spending money on a bad deal. You’ll also be in a better position to negotiate terms and ask questions—for example, if there are problems with a unit (such as bad tenants) or with a neighborhood (like high crime rates). This is especially important when buying multiple properties; making sure they mesh well as investments can help save you money down the road.
How much do you want to invest in renovations now vs. future cash flow?
It may be tempting to sink as much money as possible into a property in hopes of growing your income, but there’s a point at which investments in repairs or upgrades no longer pay off. In other words, you can take a dilapidated house and make it presentable; but unless you do serious updating—new appliances, countertops, flooring, etc.—it won’t look like it did when it was new.
What’s your budget and timeline like?
Before you start your search, it’s important to establish your budget and timeline. If you’re looking to buy property for long-term investment, you may want to consider a different set of criteria than if you’re searching for something that will serve as your primary residence. Once you have an idea of what sort of properties interest you, make sure your finances align with those goals before starting a search.
Do you have what it takes emotionally to manage it long-term as opposed to flipping it quickly?
Investing in rental properties is not just a good way to make money, it’s also a great way to learn about real estate. The skills you gain managing an investment property will carry over when you decide to sell and move on to your next property, so give it some thought before purchasing one. Can you live with that potential headache down the road? Be realistic with yourself; don’t purchase a home unless you have what it takes emotionally to manage it long-term as opposed to flipping it quickly.
Real estate is one of the most popular long-term investment vehicles. From city condominiums to luxury mansions, there are a number of options that have their perks and downfalls. Learning what you need to know before investing in real estate can help you determine if it’s right for your personal portfolio. Remember, before taking out a mortgage loan on investment property, be sure you understand all aspects of owning real estate!