Like any investment, it’s better to be well-versed in the space before diving in. Unlike purchasing stock, which may cost a dollar or two per share, you could easily pour six figures into your first property. Avoid some of the pitfalls that can occur with your first investment property by reading four beginner tips below.
1. Don't Buy a Fixer Upper
This probably seems like an obvious one but so often first time buyers can get wrapped up in the "what if" of a property. "What if we just took a few months and really made this place shine?" While the thought is lovely, the reality turns out to be way more than you budgeted for both mentally and economically.
2. Consider Your Pre existing debt
If you have a college degree that you're still paying for or a new car in the drive way with a fancy blue tooth and a fancy monthly payment, tread carefully before investing. Make sure your other debts are beyond manageable before taking on a property. Investment properties can make for great returns but there's never a guarantee that things will go smoothly. Don't pull the trigger on a purchase unless you're sure that you can afford it.
3. KNOW THE NUMBERS
How much rent can you get? What will your monthly expenses be? Understand what portion of your mortgage payment is principal and interest and what portion is insurance and taxes. Estimate the maintenance costs associated with the property. Is there an HOA fee? Consider your output along with your income, so you can make a price decision based on the realities of being a landlord.
4. LOCATION, LOCATION, LOCATION!
This is the Realtors' mantra and it is for good reason. The location of your property is an important piece of determining its value. Make sure you do your research and choose properties in popular areas or neighborhoods that are clearly up and coming. Good schools, walkability, convenient commutes, nice streets and sparkling next door properties are a few of the location aspects to consider.