Purchasing Rental Property as an Investment: A Model Approach
But every investor has to know what the market is doing now and what it is going to do in the future so they can pick assets that, with reasonable assumptions, should make a return. Having a logical investment plan is the first step in creating these fair assumptions and successfully purchasing investment property.
Here is a hypothetical four-step plan for a wise investor.
Initial step: assess your objectives.
Your hobbies and the amount of involvement you would like to have are part of this. It is up to you to decide how involved you want to be in managing your properties. What kinds of real estate are most likely to generate the kind of profits you are looking for? Can you tell me the nature of your initial investment? Do you intend to invest alone or as part of a group?
Second step: research the industry.
The simplest way to cause chaos and calamity is to buy investment property all across town in a random fashion. Starting small and growing your portfolio as you go is far easier. The following are some characteristics of the neighborhood to look for in a potential rental property: Is the local population relocating to or out of the area? For what percentage of the time do houses in this neighborhood typically stay on the market? In general, how much does the market rise or fall each year?
The third step is to assemble a team.
You should have a real estate agent and a lawyer on your team. You might want to think about getting an insurance agent and a tax counsel when your wealth increases. You should absolutely have a contractor on speed dial to assist you in estimating repair prices and times if you are not the do-it-yourself kind.
Choice of property is the fourth step.
Those desirable communities that are popular among working people are the ones you should aim for if residential property is your investment objective. Less damage and a lower cost to rent again are the results of decreased tenant turnover. Avoid houses with swimming pools and functional fireplaces, as they tend to increase repair costs and insurance premiums.
Now is a great moment to acquire investment property because there are a record number of consumers who are in the market to sell their homes. As a result of widespread price declines, investors now have more opportunities than ever to buy cheap, pay cash or take out small loans in order to grow equity. If one invests in real estate now, they should be in a better financial position when home values go back to normal.
