If you’ve been looking for a stable, long-term investment in Bellingham, residential rental homes might be the investment you’ve been looking for. Regardless, it’s safe to say that investing in an investment property is not equal to buying a residence. To make sure that your first investment property is successful, here are a few things you should take note of. Here are the basics that you need to know about buying investment properties. Use this guide to gain confidence when you purchase your first residential rental property.
How It Works
The concept of buying an investment property is a pretty straightforward one: investors purchase a property with the intent to lease it to a tenant. This buy-and-hold model is one of the most common ways that real estate investors start their property portfolios. There are, however, differences between buying a primary residence and a rental property.
One very common mistake first-time investors make is to purchase a property they themselves want to live in. This is unwise because being emotionally attached to a particular house can create personal bias and cloud judgment. Instead, investors use a set of calculations and market comparisons to find and evaluate properties to buy. There are some key figures you should be well versed with. These are the fair market value, the fair market rent, and your expected return on investment (ROI). By looking at the different properties in the current rentals, you will be able to distinguish which properties will make for profitable rentals.
Another way that buying an investment property is different from buying a primary residence is financing. What most investors find challenging about financing an investment property is that it usually requires a 20% down on the mortgage. You will need a bit of cash saved up after you make the down payment since there are other costs like the closing costs, repairs, and other rental funds to prepare the property for its first tenant. Hence, starting the financing process early will lead to a better chance of you being able to move quickly when you see a rental property that you want.
What to Look For
You have to know what features people are looking for in a rental property. Know what the people are looking for — the location, size, amenities, and condition of the property and details about the local rental market. Research on the kind of people who rent single-family rental homes and try to find out what they look for in a rental home. By researching and talking to rental property experts, real estate agents, and other housing market experts, you can get a picture of what kind of renters you might be having and what kind of property they are looking for.
At last, the search for the bargain begins. To help maximize your monthly cash flows and, eventually, your resale value, rental property investors typically look for properties sold below market value. This means that the property will most likely be older and in need of renovations and repairs. Make sure you take these repairs into account when planning your operating budget.
How Long Does It Take?
In buying a property, there isn’t a fixed time. It may take you a few months, while other investors could take years. It all depends on how fast you want to pace yourself. The average time to close on a mortgage in 2020 was about 60 days, plus added days spent on looking for the right property. It will always be a case-to-case basis for everyone since there are a variety of factors to consider.
Do yourself a favor: avoid rushing the process so that you avoid feeling pressured. There’s no set deadline on these kinds of things, especially because they’re big investments. While every property will take time, you can make use of that by really going through your options and finding which one suits your needs. A wise thing to do, though, is to be thorough in your search and inquiry. When you find the right bargain, it will be easier to decide since you already thought it through.
If you are in the market for your first investment property, getting the right team is a key decision! Why not give Real Property Management Teyata a call? Our team of Bellingham property managers helps investors determine fair market rent, perform comprehensive assessments on potential rentals, and even help you locate off-market deals. The more you know going into your first deal, the more confidently you can become a successful rental property owner. Contact us today!
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