Thinking about buying your first investment property but not quite sure where to start? Don't worry, you've come to the right place! Let's go through six helpful tips together to guide you, a beginner, in choosing the best investment property. Remember, this decision is a big one and can greatly impact your success as an investor. So, let's take our time and make a thoughtful choice, shall we?
1. Prioritize Cash Flow Initially
The key skill you'll want to pick up first is figuring out and assessing cash flow for the different properties you're looking at. No matter how good a property looks on paper, if the cash flow isn't strong, it's probably not the best buy. Your aim as a real estate investor is to create a stream of passive income. But, you won't be able to do that if you keep buying properties with minimal or negative cash flow. This is especially true when you're just starting out. Once you've got a bit more experience under your belt, you might be able to play around with this rule a bit. But for now, let's make cash flow your top priority.
2. Avoid Becoming Too Attached to a Property
It's pretty common for new investors to make a certain mistake, but the good news is, it's completely avoidable! You should avoid falling head over heels for a property. Remember, the reason you're buying these properties is to run a successful business that earns you money every month. So, try not to let your emotions for a property cloud your judgement, causing you to overlook the other important aspects of real estate investing. This could lead you to go the extra mile for a property that might not be worth all that effort. But hey, if you do find yourself really liking a property, just make sure it's one that's going to give you great cash flow and won't cost a lot in maintenance. This way, even if you have a soft spot for a certain property, it can still bring in some money for you.
3. Take into Account the Location and the Rental Market
When you're ready to dive into the exciting world of property investment, there are a few things to keep in mind. Location is key - you'll want a place that's nestled in a neighborhood with great schools or lots of job opportunities. It's also a good idea to look for a spot with easy access to public transportation or highways, to make the daily commute a breeze. Think about who you'd like as tenants - families or young professionals - and make sure the property appeals to them. Be wary of properties that seem like a bargain, as they might be cheap for a reason, like a lack of interest from potential tenants. And remember, the income from rent should cover your monthly expenses with a little bit left over, so you're not losing money on your investment. A handy tip to remember is to think about what you look for when moving to a new place, and use that as a guide when choosing your investment property.
4. Steer clear of fixer-uppers for your initial investment property.
Fixer-uppers certainly have the potential to be a rewarding investment, but they might not be the best starting point for your first deal. It could be a good idea to get your feet wet with some simpler properties before diving into the fixer-upper pool. These can be a bit tricky and complex to manage, especially if you're new to the game. But don't worry, this doesn't mean that fixer-uppers are off-limits for you forever. Once you've built up a solid team of contractors and have enough time to dedicate towards renovating a property, a fixer-upper could definitely be a great option for you to explore.
5. Obtain Pre-Approval for a Mortgage
Having a pre-approval in hand before you start looking at and purchasing your first investment property can greatly reduce stress and be beneficial for your mental health. This is because it provides you with a clear understanding of your investment budget and how much property you can afford. Moreover, having a pre-approval can give you an upper hand in negotiations as you can expedite the property buying process, unlike others who would still need to wait for approval. In the realm of valuable investment properties, time is critical, and thus, this pre-approval could be your gateway to secure a property promptly.
6. Do You Possess the Time to Oversee the Property?
Wrapping up, consider if you have the leisure time to personally manage your first investment property, or if you might need a little help from a property management company. Choosing the latter is nothing to feel embarrassed about. Starting your investment journey with a property manager from the get-go could make your landlord life a breeze. It could also help you grow your property portfolio quicker as you won't have to spend all your time on repairs or juggling complaints from unhappy tenants.
You Are Now Prepared to Purchase Your First Investment Property
Sounds pretty straightforward, doesn't it? However, putting it into practice might be a bit more tricky than it looks. But hey, don't worry! If you stick closely to these tips, you'll be able to pull it off.
