Buying an investment property is a little different than buying a single family home to occupy yourself. The experts at Allen Tate Greensboro can help you find the perfect investment property but before you buy an investment property there are five things that you should know:
Plan On Putting Down A Hefty Down Payment
Private mortgage insurance isn’t available for investment properties so investors will need to put down a larger down payment than they would have to put down for a non-investment property. If you are financing the investment property you should plan on having to put down anywhere from 15-20% of the total cost. Also you should be aware that the loan costs may be higher because it’s an investment property.
Have Realistic Expectations When It Comes To Renovations
First time investors may be tempted to snap up a great deal on a fixer upper investment property without realizing just how much it can cost to swiftly bring a fixer upper up to code and make it attractive to renters. When you’re looking at investment properties it’s essential to consider more than the bottom line. It’s a good idea to have a professional contractor look over any properties that you’re considering getting a professional’s assessment of the home and the amount of work that it’s going to need. Otherwise you could end up going over budget really quickly and you could even end up upside down on the investment.
Know The Neighborhood
When you’re purchasing an investment property the neighborhood is just as important as the condition of the property. You should take time to look around the neighborhood and make sure that it’s a neighborhood that won’t have any trouble attracting renters. Look for things like the availability of public transportation, if the houses around are in good shape, the proximity of stores and businesses, and the rating of the local schools.
Choosing an investment property in an established neighborhood that will appeal to renters is essential if you want to get the most out of your investment. The only exception to this is when a property becomes available in an up-and-coming neighborhood and you want to jump on that opportunity. If a particular neighborhood isn’t a great neighborhood currently but it’s on the upswing and it’s poised to be a neighborhood that’s in high demand with renters then it’s worth taking a look at any properties in your price range that become available.
Remember The 1% Rule
The 1% rule is what will determine whether or not a property is a good investment. The rental price should be 1% of the total cost of the property. If that rate is average for that neighborhood then the investment property is a good purchase. But if 1% of the purchase price is a number that is much higher than the average rent in that area then you shouldn’t buy that property because it would be difficult for you to get the rent you’d need to get a good return on your investment. So if the purchase price of the property is $150,000 you’d need be reasonably sure that you could get $1500 a month rent for that property in order for that investment to make sense for you.
Factor In Extra Costs Like Taxes And Insurance
There is more to the cost of buying an investment property than the cost of the property. You should always factor in the costs of taxes and insurance into the amount of money that you’re putting into the property. When you’re deciding what amount of rent you need to get from the property in order to make it a smart investment those extra costs need to be considered so that you don’t get stuck losing money on your investment because the rent doesn’t cover all of the costs.
Call Allen Tate Greensboro today to get more expert tips about buying investment property in Greensboro.