Buying an Investment Property

Today’s low home prices paired with record-low mortgage interest rates make right now an appealing time to buy an investment property. The market is also showing signs of recovery, so it truly could be a good time to invest in real estate. However, before you jump at buying your first investment property. Consider the following: Remember that old cliché saying: Location, location, location. The location of your property is important, especially if you want to rent it out. Stay away from rural areas where few properties are being rented. Look for properties in places with a low crime rate and a good school district. Know what your options are. Do you want to become a landlord? Do you want to restore and resell properties? Would commercial real estate be a better investment for you? Many first-time investors start with residential housing, but it’s important to be aware of your options and thoroughly research them.  What will the additional expenses be? You will most likely have more expenses than just the monthly mortgage payment on your investment property. Consider the HOA fees, utilities, ongoing maintenance, and insurance. Make sure your monthly cash flow will help you manage your additional expenses. What are the loan requirements? For investment properties, there are usually higher interest rates and a larger down payment is required – usually 20 percent, since mortgage insurance isn’t available on investment properties. What is your time frame? Determine when you want to purchase your investment property. Take your credit score into consideration. Make sure you will be able to get a good rate with your credit score. If not, you may want to work on improving your credit score before becoming a real estate investor. Also consider your cash flow and savings when setting your time frame. Make sure the property meets your needs. Just as you would as a first time homebuyer, make a property wish list. Use a real estate agent to assist you in finding a property that fits your needs. Consider and prioritize your needs and wants, and look for a property with the most important features.