6 Tips for First Time Investors
1. Can You Fix It?
If no, then it’s probably not a good purchase. If you personally have experience with carpentry, plumbing, electricity, etc. then it’s worth a look. Or if you have a contractor who can do the work for a good price so it doesn’t eat a hole in your pocket after already dumping money into a mortgage.
2. Pay Down Debt
Paying down debt is crucial for first time investors. A lot of experienced investors will carry debt as a part of their investment portfolio for tax purposes. If you have student loans, medical bills, or even kids that will be attending school any time soon, those bills will add up fast on you.
3. Got Cash?
As a first-time investor, capital is key. Traditional real estate transactions typically warrant a down payment of 20% of the selling price. For investment properties, the typical required down payment is anywhere between 20%-25% but shouldn’t expect 20% to happen often.
4. Interest Rates
Why did you buy an investment property? For profit from renting? If that’s the case you want to watch the interest rates so they don’t cut into that profit. Ways to avoid high interest rates is by getting your loan from smaller banks as they will have more flexibility to work with you. Also, if you have the capital, place a larger down payment to keep the interest rate at the lowest percentage possible.
5. Calculating Expenses
Making sure to track your expenses is very important key to make sure you maximize profit. Operating expenses will be somewhere around 35%-80% of your gross operating income. Expenses that will sneak up on you include things such as increased insurance prices due to your “investor” status, versus being a home owner occupant. Also, you’ll spend anywhere from $1,000 or more to repair carpets, paint and landscaping etc.
6. Location Location Location
Finding a property that is going to make you the most property is important, but the number one selling point is location. Finding a property that’s placed in a town with lower tax rates, decent school district, low crime neighborhood, etc. Other selling points that most people wouldn’t think about, is if the town has a growing job market or great amenities such as restaurants and movie theatres.
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