7 Tips To Keep In Mind When Buying Your First Property

Many people got rich buying and selling real estate. So, investing in real estate is a lucrative business. Unlike buying stock, you can easily put in millions of dollars into your first purchase. But you have to have the necessary information before getting started. Below are some tips for you to get started.

1. Repairs

Do you know how to use a toolbox? Can you repair drywall? Can you unclog a toilet? There is no doubt that you can call a professional to get these jobs done, but this will cost you a significant amount of money. Most property owners, especially those with a few homes, do the repair work on their own in order to save money. So, if you can’t do these projects yourself, you may not want to be a landlord.

2. Debt

Experienced investors have debt as an important part of their portfolio of investment. However, a common man can’t afford to carry debt. So, if you have a student loan to pay, or you have some medical bills to pay, buying a rental property won’t be the right move for you.

3. The Down Payment

Usually, if you want to invest in real estate, you should be ready to make a big down payment. Aside from this, investment properties require approval requirements that are more stringent. So, the small sum that you put down on your home won’t work for your investment property. For this, you need a minimum of 20%. So, you have to keep this in mind.

4. Higher Interest Rates

Now, the cost of getting a loan may not be that expensive, but the rate of interest on your investment property may be a bit higher. Keep in mind that you need to make a mortgage payment that won’t be so high. This payment should not be too difficult for you to pay.

5. Figure out Your Margins

Big firms that purchase some distressed properties opt for at least 5% return on their investment. The reason is that they have a staff to pay salaries to. As an individual, we suggest that you aim for 10% ROI. According to estimates, the maintenance cost of the properties is 1% of the value of the property.

6. Buying a Fixer-Upper

You may want to get a house that can be bought at a bargain for flipping into a rental. However, if you are going to buy for the first time, doing so will be a bad idea. Moreover, unless you are good at home improvements, the renovation will cost you plenty of money. What you need to do is search for a home the value of which is lower than that of market. Moreover, make sure that the house doesn’t need heavy repairs.

7. Figure out Operating Expenses

On average, the operating expenses on a fresh property are at least 35% of the gross operating income obtained from that property. So, you should figure out your operating expenses as well.

Hopefully, now you are ready to buy your first home