When is the right time to buy an investment

WHEN IS THE RIGHT TIME TO BUY AN INVESTMENT PROPERTY? HERE ARE THINGS YOU SHOULD BE LOOKING FOR

Jerel Washington

Buying an investment property can be an exciting decision to achieve future financial stability wealth generation. This decision also could go horribly wrong if you are not informed. Good returns on your investment are not guaranteed unless you approach it strategically. If you are new in the world of investment properties, you can get easily overwhelmed by the process. To avoid this overwhelming process, there is a lot of things to consider and plan well. Regardless of what you want to invest in, whether it’s a vacation real property, a rental condo in the city, a commercial investment, or any other real estate investment, you need to approach it with a clear mind and good knowhow of making a good purchase.

This article features some important guidelines for things you should consider when buying an investment property.

1. LOCATION.

Location is one of the crucial factors that you must consider if you want a good return on your investment. Vacationers will not prefer a flashy vacation home if it is not located in a place frequented by people from all over. Before you buy an investment property, think location first. The right property in the wrong location will not be profitable.

INVESTMENT PROPERTY DOWN PAYMENT DIFFERENCE

Down payment when buying a standard family home is different from the investment property down payment. Buying a home requires a 1-10% down payment while purchasing an investment property requires a 15- 20% down payment. Investment properties also do not qualify for mortgage insurance. When securing finance, investment properties face stricter approval requirements, and that is why they need a substantial down payment. Before you buy an investment property, ensure you have secured financing first and can afford the required down payment.

2. THE 1% RULE

The 1% rule in real estate is the term that investors use

to determine whether a specific investment is worth taking. The rule requires that your investment should earn you not less than 1% of the total amount you paid for it. That includes the purchase price and additional expenses, such as repairs and renovations.

Take a case where you spend a total of let’s say $250,000 to purchase an investment property and make it ready for use. You should expect to earn at least 1% of $250,000, which is $2500 per month from its operations.

If the investment property you are planning to buy doesn’t play at least around the 1% rule, it is not worth taking.

3. VARIABLE AND FIXED EXPENSES

Buying the property is not the end of it all. The property comes with so many other expenses, both fixed and variable. Variable expenses are very challenging to foresee, and that is why you need to have a flexible budget that will accommodate them. The fixed costs, such as property taxes, homeowner insurance property management expenses, among others, need to be included in your yearly or monthly budget.

Before you buy an investment property,

analyze all the possible variable expenses, and determine whether the property can cater for them and still maintain profitability.

4. ANALYZE RISKS.

All investments come with varying levels of risks. Before you make a move to buy a property, you must have a knowhow on the risks to prevent frustrations. Some of the risks that come with investment property include; taxes could hike, encountering bad customers, dynamic market forces, and also low rental interest than expected.

As much as you should not focus on the risks alone, you should not ignore them. Just make sure you are not too optimistic to see the risks, but instead, you should plan for them.

Having these factors in mind, you are now in a better position to buy an investment property that will be fruitful. Don’t wait any further; the power is now.

Works cited

https://www.moving.com/tips/6-factors-toconsider-when-buying-an-investment-property/.