What You Need to Know Before Purchasing Your First Investment Property
A Guest Post by Noah Rue
We’re all familiar with how making the right investments can set us up for financial freedom. Many people are starting new businesses, taking advantage of stocks, leveraging social media, inventing new products, and so forth to open up new streams of income for their families. With that being said, real estate is becoming extremely popular in the financial freedom conversation.
Building a rental property empire is a dream for many entrepreneurs. An investment property, specifically, can be one of the most profitable assets you own if done right. It’s a solid way to generate income for years to come.
But there are some key things to know before purchasing your first investment property. Here are three of them.
Plenty of Research and Studying Beforehand is Required
You don’t want to just wing it when it comes to purchasing your first investment property. It’s best practice to do plenty of research and study before anything else. Becoming knowledgeable in everything it takes to buy and maintain your first investment property will only make the journey smoother.
For example, let’s say you’re considering purchasing a fixer-upper for your first investment property. Research the risks associated with doing so, like the cost of renovations adding up quickly or those renovations taking a lot longer to complete than expected. You may find that a home that’s close to move-in ready is a better fit. You’ll be able to make some worthwhile home improvements to increase your home’s value before renting, like updating the curb appeal or adding smart technology throughout.
If you want as much knowledge as possible before purchasing your property, formal education in real estate may be the best route. Real estate experts tell us that “While in real estate school, you will study various legal aspects of real estate as well as important industry practices. You will study the processes behind buying, selling, closing, escrow, taxes, mortgages, and more. You will also learn about the various land descriptions along with how to acquire and transfer property.” Knowing as much as you can about real estate only helps you make more informed decisions about purchasing your first investment property.
Also, in your research phase, you’ll most likely learn a lot about the financial requirements of purchasing your first investment property. So, you’ll want to ensure you ready your finances well in advance of any purchase.
You Must Ready Your Finances
Purchasing your first investment property is a hefty financial responsibility. And you want to ensure you’re prepared for it. So, get your financial landscape in the best shape possible before your purchase.
You want to take a thorough look at where you are financially. What is your credit score? Do you have down payment savings? What’s the minimum credit score and down payment amount needed to qualify for a mortgage? Do you meet these minimums? What are your current streams of income? How much debt do you have? Answering questions like these will help you create a detailed overview of your financial situation. You can then do things like improve your credit score, pay down your debt, start a savings plan for the down payment, and so forth.
As you ready your finances and learn everything you can about real estate and investment properties, it’ll probably hit you that this a lot for one person to do. And so, it may be best to assemble a team around you.
You Don’t Want to Do This Alone
There will be many bumps on the road to purchasing your first investment property. Having the right people around you to support you through them will be invaluable. So, do your best to assemble your version of an investment property team.
Even if you can’t afford to hire experts, we all have people around us who specialize in different things. Many of these people have knowledge or skill in something that could help you in your investment property journey. For example, a family member could be a real estate agent, a friend could be skilled in advertising rental properties online, or one of your social media friends could be a top home mortgage blogger. So, don’t be afraid to ask if they’re willing to help and barter for their services.
Conclusion
Ultimately, there’s a lot to do before purchasing your first investment property. Start with plenty of research on investment properties, readying your finances, and assembling an all-star team to make your first investment property the best it can be.
Originally published at The Daily MBA.
