Buying an investment property to start a real estate portfolio is an excellent way to build wealth. In a buyer’s market, you can acquire properties at a reasonable price and turn a profit.
You don’t need to have extensive experience in real estate or a realtor’s license. Sometimes, you don’t have to use your money to purchase properties. With the right connections, you can use private lenders to buy properties and repay the money from the proceeds of a sale.
Are you looking to purchase your first investment property? Keep reading to learn what four things to consider before making the purchase.
Table of Contents
1. Your Purpose for Buying an Investment Property
There are different reasons people choose property investment. Rental property investment is a way to earn money continuously. It’s a popular choice for retirees.
Other investors buy properties, renovate, and then resale at a profit. This practice is commonly known as flipping houses.
Next, there’s commercial property investment. This option is quite profitable because you’re earning income from multiple businesses. Shopping centers are popular investment choices for individuals or investment groups with substantial capital.
Whichever way you go, do your research and decide what’s right for you.
2. How Will You Finance the Purchase of Property
There are different ways to finance your investment property. If this is your first purchase, you can use personal funds, get financing from a lender, or seek a hard money loan.
Each option has its pros and cons, with the pros coming with these advantages:
- Fast closing
- The property becomes collateral
- You’ll have a faster return on investment
Whichever option you use, make sure it’s right for your situation. For traditional loans, your credit history will matter. Plus, having a plan to repay a loan if the property doesn’t sell in the expected timeframe.
3. Is It the Right Time to Invest?
Ask yourself if now is the right time to invest. Most of the country is in a seller’s market. This means the demand for homes is high. As a result, most sellers can get their asking price without much negotiation.
The downside to a seller’s market for someone buying an investment property is your inability to sell for a hefty profit. In cases where you’re considering a rental property investment, follow the job market and unemployment trends to figure out where to buy an investment property.
4. Can You Make a Profit of the Property?
The ultimate goal of property investment is to make money. The most important question to ask is whether or not the purchase will yield the desired ROI.
If not, can you afford to sit on the property until the market’s turnaround? Being able to forecast real estate trends is a plus.
Remember, buying an investment property is an excellent way to make residual income. As long as you follow these four steps and do your research, you’ll be okay.
There’s no time like the present to learn how to invest money. If you enjoyed this article, continue to browse our site for more great investment tips.