It is well known that real estate investing is a good way to acquire a passive income that will continue to grow over time. However, not all investment properties are equally profitable. If you want to get returns on your investment like they do on the TV shows, you will have to learn how to assess a home and also be able to look honestly at your own financial position. This means that you are going to have to learn as much as you can about real estate. Among the important things to do before buying your first investment home are:
• Learn What Kind of Property to Buy
As a first time investor, you will want a property that is suited to your level of experience. This holds true whether you plan on renting the property out or fixing it up to flip it. You will want to buy in a neighborhood with which you are familiar. Even if you are buying in your town and think that you know the area well, still do some additional research. Find out why some homes rent or sell and others do not. Ideally, your first investment property should be small; you can work your way up as you learn.
• Understand Your Limitations
Your main limitations as a first-timer will likely be your budget and your experience level. Know what you can afford to buy and stay within that range. Know what upgrades you can afford and try not to go overboard. All of this takes careful research and planning. Before buying your first investment home, ask around; find people more knowledgeable about investment properties and go to them for advice.
• Get Yourself Prequalified
This is as important when buying investment property as when buying your own home. Your loan officer will tell you how much you will pay each month and the interest rate you can get, which provides you with what you need to determine how much you can make from your property.
• Understand the Expenses
Just like with many small business owners, one of the big problems you may have as a first-time real estate investor is coming up with an accurate estimate of your expenses. You should consider factors like your legal fees as well as the cost of having the property vacant prior to finding a tenant or buyer; maintenance and upgrades may also cost more money than you expect.
• Get Expert Help
You will need experienced help on all fronts. You should first find an agent who understands investment properties and knows what to look for; also, find a contractor who can advise you on which properties are worth the expense of upgrading.
Real estate investing is a complex field and buying your first investment home comes with numerous potential pitfalls along with the possibility for high rewards. A first-timer can never learn too much.