An investment property presents an opportunity to earn passive income. Some investors take the buy-and-sell route, while others stick to rental properties. Although the process looks simple on the surface, buying an investment property has its fair share of complexities. From down payments to time frame to projected returns, there is more to this venture than meets the eye. Before investing, carefully consider the following:
Property Market Trends
A property whose value increases over time is the ideal investment. However, it is not easy to identify locations with the potential to become real estate investment hotspots in the future. You do increase your chances of choosing well by keeping yourself updated on housing market indicators and rental property trends of shortlisted areas. List down property prices and taxes, compare them and see if there are noticeable patterns. Buying a home is a major endeavour, but if you do your research and make an effort to understand market trends, you will be able to find the ideal property at your preferred location.
Partnership and Similar Arrangements
Some investors pair up in a bid to pool resources and save up on maintenance and repair costs. Partnerships also make it easier to comply with requirements and spot problems the other partner might overlook. While this setup is favourable in certain quarters, buying an investment property with a business partner means your revenue will be split in half. You and your partner will share liabilities as legitimate owners of one property; should the partnership end for whatever reason, you need to go through a long-winding legal procedure to protect or implement changes on your shared asset. Remember to choose a trustworthy business partner and seal your deal with a mutually beneficial contract.
Paying Property Taxes
Communities and local governments are supported by the property taxes paid by homeowners. These taxes will be allocated to fund different public projects and services. The amount of tax levied would depend on the property’s value. Understandably, owners of big houses and properties in prime locations pay more. Where you are located also matters. Those residing in rural or less urbanised areas tend to pay less taxes than residents of major cities and CBDs.
Hiring a Buyers Advocate
The property purchasing process takes time and you may want to avoid taking too many day-offs than necessary. Home buyers with a lot on their plate always have the option to hire a reputable buyers advocate, who will act as their representative on all real estate transactions. Have a good long talk with your contracted agent and let them know exactly what you are looking for in an investment property and give them. They will procure listings, schedule site visits, and negotiate on your behalf, removing some weight off your shoulders.
Loan Applications
Note that mortgages and loans for an investment property follow a set of procedures different from personal home loans. There are several forms of investment property financing and you need to carefully assess each one of them. Clear old debts first before embarking on another loan. Be aware of how your finances flow and identify the best mortgage option for you based on your own money management habits. Lenders and banks impose strict requirements to deter foreclosure and default risks.
Owning An Investment Property
Real estate investing offers long-term benefits that make the risks all worth it. However, you have less to worry about if you are prepared. Seriously consider your financial stability, the state of the housing market, property taxes, business partnership, hiring a buyers agent, and choosing the right mortgage firm or plan. The journey to buying an investment property is both challenging and rewarding.
