Buying real estate can be a great investment, whether it’s your primary residence, a second home or an investment property. Maybe you want to buy a home, fix it up and flip it or maybe you want a long term rental. If you are looking for a long term rental, here are some things to consider.
Down Payment – expect to put more down, typically 20-25% down. Expect higher interest rates and more restrictive guidelines for mortgage underwriting. You can’t use gift funds typically and you are limited in what the seller can pay towards closing costs.
Property Management – Do you want to be a landlord or will you have a property management company handle the busywork? Remember if you are the landlord, you are the one that gets the calls at all times – 24 hours/day. When something stops working, you are the one they will call. If you hire a management company, they will take of the details, but it costs you money.
Rental Income – will this property make money or cost you money? Is it currently a rental? If so, ask what the rents currently are. Look in the area at other rentals. Can you charge enough rent to make money? If not, then you may want to look for another property.
Expenses – do you have the funds necessary to cover unexpected repairs? If the furnace goes out, you need to fix it. If there are any repairs, it’s up to you. You need to maintain the property – cut the grass, shovel snow, etc. What happens when your tenants move out? You will need to cover the cost of the mortgage even if you do not have anyone paying rent.
Buying and investment property is a big decision, but if you do your research and are prepared for any and all possibilities, it can be a great investment! It can bring in extra money every month and give you another way to build your investment portfolio. Talk to your loan officer and see if you can qualify to buy a property!