Property Professionals – 5 Expert Tips For First-Time Property Investors | The world of real estate investing has turned out some of the planet’s wealthiest people. With that said, real estate investing isn’t for everyone. There’s a lot to learn, much of which is experience-based rather than book-taught, which means it’s worth getting yourself a mentor when first starting out.
In addition to finding a mentor, consider the following tips as they have been designed to help you prepare for and avoid some of the mistakes first-time investors make:
- Find the Right Location
As you probably already know, location is key when purchasing any type of real estate. The last thing you want to do is buy an investment property in a part of town that’s run down or otherwise not earmarked as an up-and-coming area.
It can be difficult to choose the right location, though, if you don’t know what you’re looking for. As a first-time investor, you should consider working with a property investment consultant. Their job is to know everything you don’t and advise you on which properties will make the best investment opportunities.
- Decide Whether You’re Cut Out to Be a Landlord
Being a landlord requires more than just collecting rent on the first of every month. You need to be somewhat handy, and if you’re not, you need to have the money to hire professionals when something needs to be fixed on your investment property.
You’ll also need to devote a serious amount of time and energy to upkeep and maintenance. If you hold a full-time job in addition to being a landlord, this could be an issue. You need to consider these things carefully to decide if being a landlord is really something you want to do.
- Pay Down Your Personal Debt First
Many experienced real estate investors carry debt as part of their extensive portfolios, but as a first-time investor, you’ll want to have as little debt as possible. As such, you should focus on paying off things like student loans and medical bills before purchasing your first investment property. Also, if you have children who will be attending college in the near future, it might be wise to hold off on purchasing an investment property until they graduate.
If you’re intent on getting into real estate investing despite your debt, take a moment to make an important calculation before jumping in. Will the return on your investment be greater than the total amount of debt you’ll incur from the investment itself and your existing commitments? If so, purchasing your first investment property might make perfect sense.
- Consider the Down Payment Carefully
When you bought your primary residence, you likely didn’t need a huge down payment. This is because owner-occupied properties have less stringent approval requirements than investment properties. Most lenders require at least a 20% down payment because mortgage insurance isn’t available for investment properties. If you don’t have enough for a down payment, you may be able to obtain the funds you need through a personal loan.
- Plan for Emergencies
Your investment property will probably cost you more than you planned. Besides your monthly mortgage, taxes, and insurance, things will happen that are likely to be expensive to fix. You’ll do yourself a huge favor by putting away at least 20% of your rental income, so you have the funds you need to make repairs without emptying your wallet.
If you’re interested in getting into the real estate investing business, be realistic with your expectations. Consider the tips mentioned above to decide if it’s right for you.