Buying Your First Investment Property
The 5 “Knows” You Must Know
Purchasing your first investment property is a brave commitment yet a commendable one when executed shrewdly. When one invests wisely he or she can reap fulfilling rewards that can be lucrative throughout retirement. However, for those who don’t thoroughly educate themselves about the potential risks and ramifications that are involved with an investment property they become prone to a bad debt. Here are some reliable guidelines that can help steer you towards a profitable investment rather than into a money pit.
KNOW How Much You Are Willing, And Able To Invest
First thing’s first. You need to establish where your price point is and how much of a loan you will qualify for. A down payment is a huge chunk of change so you need to decide just how much capital you want to relinquish. Before you even begin to start looking at properties find out how much of a loan you actually qualify for. People often make the mistake of falling in love with a property only to find out they don’t qualify for the loan. It is nothing but a big waste of time and heartache to salivate over a piece of property you’ll never get your fork into.
KNOW Your Area of Interest
Become an expert on the area you want to invest in! Hire a realtor, search real estate listings on the MLS, pick up real estate magazines and newspapers and pay attention to how the market is moving. Do a comparative market analysis on every property of interest. Drive through the neighborhoods both during the day and at night and observe the demographics, schools, surrounding amenities, churches, etc. In certain cities like Nashville the neighborhood demographics can drastically change within a matter of a couple of blocks.
KNOW Your Exact Numbers
Evaluate and know all the costs it will take to maintain your property. I mean ALL COSTS. Factor in any initial upgrades that might be needed, your mortgage, property taxes, utilities, insurance, unforeseen repairs, wear-and-tear. EVERYTHING. Make sure you are financially comfortable with the overall expenses and be sure it is feasible to render a return on your investment.
KNOW The History of The Property
Do your due diligence like there’s no tomorrow! Get the County tax records and make sure there are no liens assessed to the property. Find out how old the roof is and when it will need replacing. Know the construction materials of the property, plumbing history, sewage, any structural issues, HVAC condition, etc, etc, etc. Although much of this will be disclosed in your property inspection if you see any existing major red flags up front then don’t waste your time and go and find another property.
KNOW How Long of An Investment You Want To Be In
Ask yourself how long you want this property in your life. Do you want to raise your children in it? Retire in it? Do you want it as a rental property that generates positive cash flow and then sell when the market peaks again? Do you want to be a landlord or hire a property manager? Or are you interested in the now-more-than-ever popular investment strategy of “flipping” properties within a month of rehabbing? Investment properties are meant to be just that, an INVESTMENT. You want to render as much equity and profit as possible so you need to know how long of a term you want to be committed to in order to accomplish that. Always know your numbers and capabilities and by all means enjoy the financial journey!!
If you or someone you know is interested in buying or selling
a Nashville Home please contact:
The Lipman Group | Sotheby's International Realty
Office: (615) 463-3333 / Cell: (615) 509-1753