When we think of buying our first investment property, it can be super exciting, and we don't always realize the tangible benefits of investing in real estate.
Yahoo! Finance mentions the many benefits when investing in real estate, one of them being appreciation:
Real estate appreciates naturally, and you can also force it. Home renovations and remodeling can improve a property’s value, giving you an even greater return on your investment.
Another good benefit is cash flow:
If you invest in a rental property, you can earn cash flow in addition to any appreciation. You earn cash flow from the rent charged on the property and after you pay the expenses including the mortgage, taxes, insurance, and any maintenance costs.
Yahoo! Finance goes into some more details about the benefits of investing in real estate by mentioning that you can leverage your investment and diversify your portfolio. There are several things to know when buying your first investment property that can be extremely helpful. Yahoo! Finance goes on to mention ten must-follow steps for buying your first investment property.
The very first question you always want to ask yourself is why? Some other great questions you always want to ask yourself: Are you trying to earn cash flow or maybe just a quick profit? Maybe it's retirement, or is it other financial goals. But most importantly is, what is your end goal?
Your goal’s timeline will determine if investing in real estate is right for you, and if so, what type of investment. The most common ways to invest are buying and holding properties (rental properties), fixing fix and flip properties.
Buy and hold properties are great for those with long-term financial goals or those looking to earn a monthly cash flow. You’ll earn money each month you have a tenant, and you can regularly look for new tenants and even increase the rent you charge as values appreciate.
Another big decision you have to make is asking yourself if you want to take on the challenge of managing a property on your own vs. highering a property management. And if you would rather fix it yourself, do you have the energy and the time to do all that work yourself? These are the many questions you definitely want to consider beforehand.
Yahoo! Finance also mentions finance solutions:
It’s important not to rely on your rental income as no home has 100% occupancy. You can’t predict if/when a tenant may vacate the property, leaving you with the expenses and no income. Make sure you have all your financial obligations covered and have enough ‘free money’ to cover your rental costs should you need to.
Some other must follow steps for buying your first investment property is things like getting pre-qualified as well as assessing your savings (Reserves) because:
you may need to have more money saved for reserves. This is money you have set aside to cover unexpected expenses or to cover the bills should you lose your tenants.
They suggest that:
It’s a good idea to have 12 months of reserves on hand. If you aren’t sure how much that is, find out the average rent in the area you're thinking of investing in.
They also suggest things like choosing your investment strategy, creating a support team, looking for suitable homes, doing your due diligence, making an offer, and finally buying your investment home.
If buying an investment property is something that you are truly considering, you can contact me HERE. I can help find you the investment property that you are looking for. Or I can just help you with questions that you may have!