Purchasing a home for purposes of investment can be an excellent way to ensure your financial security in the future. However, you need to know what to look for when buying an investment home in order to avoid some of the pitfalls. Before you take the plunge, there are a few things to consider as you consult with your financial adviser.
The neighborhood where you choose to buy an investment home can make or break your success as an owner. When looking for rental properties, the first thing they take into account is the surrounding area. For the most part, a smart investor will buy in a neighborhood with residents having similar characteristics as their target renters. In addition, it’s a plus to purchase an investment home that’s in close proximity to amenities and conveniences that appeal to tenants you’d like to attract.
Of course, if you’ll be renting your investment property out to families, it’s smart to consider the local school district. However, this consideration is also important due to its affect on property values. When making an appraisal, one of the factors lenders will look to in making an assessment is the quality of the school district. It will also impact your property taxes.
Home Owners Association
Another consideration when purchasing property for investment is whether you want to buy in a neighborhood with a home owners’ association. Not only will you need to budget for HOA fees, but you will also need to be aware of regulations affecting your investment home. For example, some HOA rules prohibit owners from leasing out their homes, while others forbid families with young children.
Your monthly budget is a significant matter when considering what to look for when buying an investment home, and property taxes must be factored into the equation. You might assume that purchasing a home with lower taxes is a wise move for your bottom line, but there are drawbacks to this approach. Low taxes might be an indication that the neighborhood is undesirable in some way, such as being located in a high crime or industrial area. On the other hand, high property taxes will require you to increase rental rates, potentially making your investment property more difficult to lease.
When looking at investment homes, you should also consider the neighborhood conveniences that your potential tenants may find attractive. High end grocery stores and boutiques will appeal to young professional renters, while large department or discount shopping areas will draw families with children. Ultimately, purchasing a home in an area with desirable amenities will increase property values, a justification that translates into higher rental values for landlords.
These are just a few of the factors to look for when buying an investment home, and there are many other considerations that you should weigh. A financial or real estate adviser can also be useful, but ultimately your budget and personal goals will help guide you to the right decision.