Purchasing an investment home can be a profitable way to diversify your investment portfolio. Nonetheless, just like any form of investment, you will need to do some homework initially, to check that this specific route is suitable for you. In light of this, we have you covered. We have put together the seven most important things to be aware of, prior to buying first investment property. Keep reading to find out how you can benefit from this knowledge.
1) Avoid Being too Keen
Refrain from 'deal chasing' while searching for a good investment home. All too frequently, novice investors end up paying over the odds for properties, because they get caught up in the excitement of their new venture. Always look at the figures and avoid offering more than the correct market value, while negotiating with sellers or in the middle of an auction.
2) Carry out Your due Diligence
You should thoroughly research every investment home you intend to buy, regardless of which clients you target. Check that the house is located somewhere that will appeal to the kind of people you wish to rent or sell to. Otherwise, you might end up with a property that does not generate the the profits you are predicting.
3) Visit the Property for an Extended Time Period
Drive to the property and park outside for a few hours on a morning and in the evening, before agreeing to purchase it. This way, you will experience what the neighborhood is actually like to live in.
4) Get a Down Payment Secured
In all likelihood, for the property you live in now, you only had to make a three percent down payment. However, because you can't use mortgage insurance on investment homes, you will need a minimum down payment of twenty percent when buying first investment property. Furthermore, investment real estate has more stringent approval criteria. Be mindful of the renovation costs, prior to making a down payment.
5) Have Patience
The property industry runs in cycles. If the price of your asset drops, you will not always make a net loss on your investment. The great thing about property is that your investment is backed by a physical asset. This means that you can be more innovative, and use renting or refinancing to acquire cashflow, instead of selling. As time passes, the price will inevitably go up again - you just have to be patient.
6) Settle any Outstanding Debts
If this is the first investment home you have purchased, you may have to use investment loans --- and your investment portfolio should not carry any debts. This is why you need to repay all your existing debts, medical fees, student loans, etc, prior to venturing into property.
7) Two Heads are Better Than one
Avoid making your initial investment on your own. Instead, enlist the help of an expert to ensure that you don't overlook the small things that cost you money. Work with a knowledgeable investor to begin with, until you have a blueprint to follow.