If you’ve been in search of a stable, long-term investment in Winston-Salem, residential rental homes may be the investment you’ve been yearning for. However, buying an investment property is far different from purchasing a residence. You will need to ascertain several things to make sure that your first investment property is a success. To get you started, we’ve summarized the essential aspects of buying investment property for you. By utilizing this guide, you can more surely detect and purchase your first residential rental property.
How It Works
The notion of buying an investment property is a pretty straightforward one: investors purchase a property with the purpose to lease it to a tenant. This buy-and-hold model is part of the most usual ways that real estate investors begin building their property portfolios. But remember, there are various huge differences between buying a primary residence (in which you consider living) and buying a rental property.
One of the huge mistakes a first-time investor makes is to get a property they like and would relish living in. This can give rise to poor decision-making, specifically if you find yourself emotionally attached to a particular house. In contrast, investors use a set of calculations and market comparisons to identify and evaluate properties to purchase. Some of the figures you’ll need to have and understand include the fair market value, the fair market rent, and your expected return on investment (ROI). By examining comparable properties in the neighborhood, as for instance current rentals, you should be able to swiftly determine which properties bring about profitable rentals and which ones should be very well avoided.
Another clear way that buying an investment property is different from buying a primary residence is financing. Financing an investment property can be a more difficult job for the reason that some lenders will call for upwards of 20% down on any mortgage. You will further want to be certain that you have cash on hand in excess of your down payment to cover closing costs, repairs, and costs related to preparing the rental and finding your first tenant. Therefore, it’s vital to start the financing process as quickly as possible in order that once you detect the rental property you’ve been looking for, you can move promptly to make it yours.
What to Look For
One key feature of an excellent rental property is that it successfully meets a very specific set of criteria or a list of characteristics. These criteria should cover the location, size, amenities, and condition of the property and details regarding the local rental market. You should know what type of people are renting single-family homes in your area and what they are yearning for in a rental home. By researching and chatting with rental property experts, real estate agents, and other housing market experts, you can perceive a lot as to who your potential renters will be and what type of property will best fulfill their needs.
After this, the hunt for bargains now truly begins! To definitely help maximize your monthly cash flows and, eventually, your resale value, rental property investors usually seek properties sold below market value. But of course, it follows that this may actually mean that the property is older or necessitates certain renovations and repairs. Make sure to calculate the costs of these repairs into your operating budget.
How Long Does It Take?
There is no set time for buying a property. Various investors will spend as little as a few months finding and making their purchase, even though in contrast, for others, the process may take over a year from when it starts to its end. The average time to close on a mortgage in 2020 was about 60 days, but take note, that does not include the time spent looking for the right property. Your buying process may be longer or shorter, really depending on a wide range of variables.
The most important thing to understand is that you should avoid rushing the process or feeling pressured to buy the first property you identify just because you have some deadline set for yourself. Each property purchase is distinct from each other, and at times attaining the right property takes a little bit of time. Although taking the time to crunch the numbers, find the right bargain, and execute things appropriately is much more likely to turn out well for you.
If you are in the market for your first investment property, you need the right experts on your team. Why not give Real Property Management of the Triad a call? Our team of Winston-Salem property managers helps investors determine fair market rent, perform comprehensive assessments on potential rentals, and even help you locate off-market deals. The more you know and comprehend going into your first deal, the more surely you can evolve to be a successful rental property owner. Contact us today!
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