First-time property investors often get so caught up in all of the excitement of investing that they forget to focus on the real issues that first-time investors can face if they don’t do the appropriate research. When you are planning to invest in property for the first time, it’s key to understand what kind of property you are investing in and how that will impact the way you handle that specific investment.
When that gets done properly, investment properties can make a great way to get a great return for the money you put in; it can also be a way to end up getting into more debt than you can afford to pay.
When investing in a property for the first time, the following are 7 questions you want to ask (and answer) about the specific property you are viewing before you decide if it makes a good investment or not:
- Are My Emotions Playing with Me? It’s important to determine if you are purchasing a property because you are emotionally attached to it (as many people are when purchasing their home) or is it genuinely a good investment. Remember, you are investing in your first property here so that lower-cost properties might be your best option. The lower the cost of the property the less you have to rent it out for to recoup your investments and start turning a profit.
- Is This Property In a Good Location? Figuring out a property that’s in a good location can be a challenge. Speak to other investors or even real estate agents about a property that might make a wise investment. Relying on those who know your area and the industry the best can help you make the most of the money you have to invest, as well as get a good return on your investment.
- Have I Done Research on This Property’s History? Before you purchase an investment property do your research on what the history of that property is. Understand how often the property has been bought and sold and at what price. Understanding the history of the property and how well you can expect the property to perform is key to knowing how long it will take you to get your investment back as well as how long it will take you to start turning a profit on your investment. View similar properties in the area and understand what rent you can get for your investment.
- Do I Have Enough of a Down Payment Saved? Before you can put a down payment on most investment properties, you will have to have at least a 20% down payment. Strict approval requirements are also common. You will have to make sure you qualify before you can buy an investment property and afford to get the loan to pay for the difference.
- Do I Understand the Added Expenses This Property Will Bring Me? Properties require maintenance and added expenses. Be sure to understand the responsibility you have taken on when you buy an investment property. Understand the money-earning potential that the property has. If the numbers don’t add up for you to make a profit in the future, then it’s not a good investment for you.
- Have I Considered Lower Cost Properties? Your first investment doesn’t have to be an expensive one. Starting with a fairly inexpensive, the basic property allows you to “get your toes wet” in the industry before jumping all in with more expensive properties. You will learn a lot with your first investment property and investing in your first property doesn’t have to break the bank, either.
- Ask yourself if you are clear of all other debts? Many individuals who are investing in an investment property also need to ask themselves if they are clear of other debt before they invest. Most people will have to take out some loan to be able to pay for the property. In order get that money out through most lenders you will have to be free of other debt such as credit card debt, student loans, or unpaid medical bills.
These are 7 great questions that you should ask yourself before you consider before purchasing any investment property. Making sure that the property will work for you and that you are not taking unnecessary risks will ensure that you make a profit on your investment. Having enough success renting out one property can allow you to gain the capital and the ability to buy additional properties and grow both your investments and your earned income. It will take time, but it’s a rewarding experience.