If you have the necessary funds to do so, investing in real estate can be a smart financial decision that provides you with residual income. By putting down enough for a down payment on a property, and then charging more for rent than you're paying on the mortgage, you can have your tenant cover the mortgage and give you a bit of extra money each month to save for a subsequent investment. Buying an investment property isn't something that you should do blindly; you're smart to seek help from a real estate agent who specializes in investments, as he or she can help you find the right property to buy. Here are some things to confirm before you make your purchase.
When you're starting out, it's especially important to find what your real estate agent deems to be a low-risk property. For example, you might find an older house that requires a lot of work but is listed for a good price, but this pursuit may not be ideal. If you end up needing to invest more in renovating the residence than planned, you may be in a financial hole early on. Your agent will show you some low-risk properties to consider instead. A newer home under warranty from the builder, for example, might be a better choice for you.
You want to buy your investment property in an area that will pay off financially. For example, if you were to buy in a part of the city that is seeking local retail close down, fewer people might want to live in your rental property. Talk to your agent about which areas are hotter — you might have to pay a little more for the purchase of the property, but a popular area will also allow you to charge more in rent. Additionally, you'll likely have less trouble getting renters.
Cost Before Renting
A real estate agent who specializes in investment properties will be able to give you an informed opinion about how much money you'll need to put into the property before you begin advertising for tenants. Unless you have experience fixing up homes, this advice will be highly valuable — you'll learn whether you'll need an extra $5,000 beyond the down payment or an extra $25,000, for example. Armed with this information, you can move forward with finding a property with the help of your agent and buying it.