With the current state of our economy, it is no surprise that more and more buyers are considering purchasing an investment property. With the real estate prices dropping steadily, it is more tempting than ever to jump into the real estate investment game. But before you go out and buy an investment property, there are a few things you should keep in mind.
The first thing you need to consider is the type of investment property you are interested in. Are you looking for a fixer upper that you will flip for a quick sale or are you more interested in a rental property. Both have their merits and both have their short comings. If you are looking for a flip, you will need to find a property well below market value which is in need of only cosmetics updates. You will need to be very careful in budgeting the renovations as they tend to take longer and cost more than originally planned. When it comes to rental properties, you must once again be careful to buy something that offers you good rents to cover the mortgage, taxes, upkeep, etc.
As with buying an owner-occupied home, before buying an investment property you need to understand the real estate market dynamics in your selected area. Location is very important in purchasing investment properties, almost more so than in buying your own home. Even though you may have lived in a particular area for a very long time, make sure you look at its potential from an investment standpoint. Do your research whether you are considering a neighborhood or area you know well or a new market. Most towns and cities will have areas that are more desirable than others so try to keep in mind specific postal codes, average median income, sale price of homes, schools, shopping, and any other factor that may impact on your investment property.
Enlisting the help of a real estate professional will save your time and aggravation. Try to choose a real estate professional with experience in investment properties. This person will have invaluable information to help you make the right decision. They will be your eyes and ears when searching for the perfect investment property. They will also have access to comparative material to help you review prices and rents.
You may also want to have a hard look at your finances before embarking on a real estate investment adventure. You will need to have a good credit rating and or collaterals as well as a substantial down payment to purchase an investment property, particularly one that is a rental property. You may also need to make cosmetics or mechanical repairs to the home before being able to flip it or rent it out. Make sure you are aware of the type of investment needed to bring the property up to date for a quick sell or to bring it up to acceptable living standards to attract great renters.
Real estate investment is a challenging and rewarding business. Those who do it are often addicted to it. However, the rewards may be great for certain investors, there are also a number of them of fail. Careful planning and number crunching with the help of a good real estate professional will help you choose the type of real estate investment that's right for you.
By:Yannick Picard
