If you’ve been looking for a stable, long-term investment in Round Rock, residential rental homes might be the investment you’ve been looking for. Nevertheless, acquiring an investment property is not the same as buying a residence. There are a few key details to know in order to ensure the success of your first investment property. To kick things off, here are the basics of buying an investment property. You can be confident when you buy your first residential rental property when you have this guide to help you through the process.
How It Works
The concept of buying an investment property is a pretty straightforward one: investors purchase a property with the intent to lease it to a tenant. This buy-and-hold model is one of the most common ways that real estate investors start their property portfolios. Buying a primary residence is not the same as buying a rental property, though; there are a few differences.
One very common mistake first-time investors make is to purchase a property they themselves want to live in. This is a bad idea since being emotionally attached to the house can cause problems for future transactions. Instead, investors use a set of calculations and market comparisons to find and evaluate properties to buy. The fair market value, the fair market rent, and your expected return on investment (ROI) — these are just a few things you want to take note of. By looking at the different properties in the current rentals, you will be able to distinguish which properties will make for profitable rentals.
Another way that buying an investment property is different from buying a primary residence is financing. The 20% down on any mortgage is what most investors find steep about financing an investment property. Make sure to save some cash after making the down payment as you will be in need of closing costs, repairs, and other expenses related to preparing your rental for the first tenant. It’s best to have your financing process already started, so that when you spot a rental property that you want, you can move in quickly.
What to Look For
It’s important that you know what features people want in a rental property. These features include the location, size, amenities, and condition of the property and details about the local rental market. Who are the people who rent single-family homes? Ask yourself, “What would they be looking for in a rental home?” By researching and talking to rental property experts, real estate agents, and other housing market experts, you can get a picture of what kind of renters you might be having and what kind of property they are looking for.
Then, the bargaining game begins. To help maximize your monthly cash flows and, eventually, your resale value, rental property investors typically look for properties sold below market value. It’s very likely that these properties will be older and in need of renovations and repairs. These repairs need to be reflected in your operating budget.
How Long Does It Take?
There are no deadlines when it comes to buying a property. Different investors will take any time between a few months to a year — the process of investing is different for everyone. The average time to close on a mortgage in 2020 was about 60 days, and that’s not even including the time spent looking for the property. The process looks different for everyone since there are so many things to consider when investing in a property.
It’s important to note that you should avoid rushing the process because you feel pressured to buy your first property. This often happens when you set a personal deadline. Because each property is not the same, it will take some time before you find the right one for you. Nonetheless, taking your time will allow you to arrive at a good bargain. This way, you end up very satisfied and happy with your purchase.
If you’re in the market for your first investment property, get yourself a good team of experts. Why not give Real Property Management Longhorn a call? Our team of Round Rock property managers helps investors determine fair market rent, perform comprehensive assessments on potential rentals, and even help you locate off-market deals. The more you know going into your first deal, the more confidently you can become a successful rental property owner. Contact us today!
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