Investing in properties can be a way of making extra cash besides your usual income. Like every business, there are people who have earned a fortune by just investing in properties. As an investor, you may decide to rent or resell the property after investment, however, real estate investments require a good amount of money. The amount of money to be invested in the property requires critical thoughts in order to make a profit at the end of the day and save yourself from incurring losses.
In this article, Investingport will be sharing some strategies and tips to take as you embark on your journey of buying your first investment property.
Before buying your first property, you must first conduct your research. The research should focus on your target client, location in which the property should be situated in order to attract the kind of clients you desire, the market appeal and market value, as well as the returns you expect from the investment in the long run. Taking finances into consideration rather than personal likes or dislikes will help you make the right investment choice because the investment is about the final returns or profit.
Get your numbers right
It is important not to miscalculate costs, rents, and values. In order not to lose money on investments, learn to accurately calculate the cash flow and profits. For instance, if you decide to invest in a property that needs to be renovated, ensure that the cost of renovation is not unnecessarily high. Money Crashers advise that for your first deal, make a budget of 50% extra as a cost for renovation and another 50% cushion as your estimated carrying cost. Also, for your after-repair value, seek professional counsel for an after-value range before making any transaction.
Select a low-cost property to be your first investment property
You may have a very huge amount of money to invest with, however it is better to invest in properties whose prices lie in the low to middle range. Keeping your first investment low as possible will keep you in a safe zone so that you do not risk losing too much money, even if you do not get the targeted profit. This tip is also necessary as you may get to renovate the property before reselling or renting it out.
Pay down your debt
Though you might consider investing using loan options, you should not be carrying debt as your investment portfolio. It is important to clear all debts such as student loans, credit card debt, medical bills, and others before investing in your first property.
Don't be scared of Negotiating
As a buyer, sellers expect you to negotiate. Negotiating boils down to the first step above- that is, researching. Before buying, research about the seller(s). Find out things like, why they are selling, how urgent it is and when they plan to move out (if the property is occupied). Negotiate by starting with the lowest amount you intend to pay for the property and watch how the seller reacts.
Take charge of your emotions
Investing with your emotions could be fatal and can result in making the wrong decisions. Try not to attach your emotions to your first investment property. Think of your investment as purely business, avoid sentiments and negotiate properly to get the best deal.
Take away: Once you find the property that suits your Investment plan, be sure that the mortgage is lower than the monthly rent that you will be collecting from your tenant. The best way to confirm this is to do a market study for the size of the property that you plan to buy. Check the average monthly rent in the area and make sure that your monthly mortgage payment is below that number. This will provide you with a good monthly free cash flow.