Things to consider before buying an investment property

by | Jun 29, 2020

Before you put your money into property investment, it’s wise if you consider its worth. Even though in USA real estate is quite lucrative , especially in Arizona, San Francisco, and Los Angeles, not all properties are worth your money. You have to be, therefore, careful and analyze the property you are buying to see to it that there is value and a return on investment. Whether you are a first time or recurrent buyer, check on the current demand on the market and the trends that are upcoming in the property market. You should be able to make a decision that will serve you in the long run and not that which will shy away from potential investments such as leases and rents

Some of the things you need to consider before you buy a property include:

1. Location

Where is the location of your potential buying investment? You need to choose and buy a property that is ideally located in terms of accessibility, closeness to support amenities as well as is in a secure region. Infrastructure such as roads, communication networks, hospitals, and schools are some of the primary factors that you should look at. If you are looking to buy off a property such as a home where you will stay, you should have no hustle on gaining access to such infrastructure. Therefore before you buy, set aside some time where you will assess the property’s location so that you are sure its worth your money. Properties new or in towns and cities will be highly expensive, but the ROI is undoubtedly worth it. The location determines the cost, and therefore if you want a high ROI in the long-run, you should be ready to pay for it.

2. Fixed and variable expenses

Apart from just paying to purchase, you should also look at the other costs you will incur while you manage or stay in the property. These expenses will determine if it’s worth paying for since you may end up, in the long run, feel burdened since the prevailing rates are not favorable. This, therefore, means that before you get to purchase, you need to do your homework right. Most sellers in the market will not give you or issue out quotes on such expenses, and thus you may be on your own. Some of these expenses may include:

l Utility bills

l Homeowner insurance

l Taxes on the property

Property management expenses.

3. Financing options

Investing will only be made real if you have the money to pay for it. Since you will have to incur the cost, what are your financing options? You need to consider where the money to pay for the property will come from. Most people opt to go for mortgages, which is a great way to finance your property investment. You need to consider how viable it is to choose the mortgage as your option. You also have other options such as borrowing from financial institutions such as banks and micro-finance, which will have an interest charge attached. While taking the loan, whether long-term or short-term, take a keen look at the interest rate. The terms of payment should be favorable for you so that as you pay back, you will not end up straining, yet you have other expenses to cater for. Borrowed finance is not to say it is the only option for you. You may be blessed enough to pay for the property since you have the financial capability.

4. Down payment options

Once you are satisfied that you want to invest in a property, you need to consider down payments. Approach the seller and ask if they are taking down payments so that you will be able to pay in installments. The down payment can be as a fraction of your purchase price and the rest you pay in installments. The installments should be your main area of interest since they may or may not favor you. Check on how lengthy the installments are as well as how much do you need to pay in each. Most sellers will add some amount if you are paying in installments since they consider the time value of money. You should be able to calculate the whole sum after interest to see if its reasonable enough to invest in so that you do not end up paying for a higher-priced property.

5. How many properties you are buying

You also need to consider how many properties you are looking for and willing to invest in. There are times where you may feel the need that one is not enough for you, and thus you will need to pull your resources for more. Here you may be able to take advantage of discounts offered by sellers who may be willing to lower the prices if you buy more than just one. This allows you to buy as much as you can at an affordable price. You, however, have to be careful also since you may end up buying as much as you can and face the risks attached. Risks such as losing all your money since you put all your eggs in one basket is what you may need to avoid also. As a speculative buyer, you can opt first to buy one see if it’s worth them, later on, fulfill your desire to have more.

6. Leasing options

Committing your finances to invest in a property needs you to be a strategic decision-maker. Since your desire to invest and buy a property such as a home may not be for you to stay there forever, you need to consider leases. Today, property owners are leasing out their properties, which is an excellent way to go about it. This you can take into consideration so that you do not have to get stuck with the property when you need to sell it. Leases are cheaper in a way and allow you to plan for your future. Alternatively, you may also be the buyer who will buy for life then end up leasing the property instead. Here you will not be entitled to expenses to do with the properties management and thus less stress for you.

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