Things to Know Before You Purchase an Income Property
Purchasing an income property is a huge decision, and one that may have a significant impact on your future financial circumstances. Here are some things to know before purchasing an income property:
1. Know Your Investment Expenses
You will need to spend a lot of money to buy, and to maintain your property. When you purchase an income property, you will most likely pay for legal fees, utilities, maintenance, evictions, accounting, and capital improvements. Based on how you manage your financing, there are other expenses that you may incur, including land transfer fees and administrative charges. This can greatly increase the costs of purchasing an income property.
2. Location, location, location
While it might seem obvious, you should never purchase an income property without evaluating the location first. You don’t have to purchase a property in a lavish neighborhood, but it’s important to familiarize yourself with the area first. Pay a visit to your would-be property at different times of the day and week, and make sure the area is comfortable enough and that the neighborhood has everything a potential homeowner would need (markets, schools, hospitals, supermarkets and so on).
3. Financing Your Property
Paying for an income property is much easier than many people think. Paying by cash is a smart move because it saves you from having to cope with loans and bank requirements. However, if you want a greater leverage, opt for a down payment. To cater for the remaining costs, consider getting a mortgage. However, be careful when assessing loans. Read the terms and conditions, and know the interest rates beforehand.
4. Self Management versus Professional Management
Whether or not you should manage your income property will depend on your plan, availability, qualities and preferences. On the contrary, hiring a professional property manager will help reduce the costs of repair and reduce vacancy.
5. You Won’t Get Rich Overnight
You can make a significant amount of money by investing in income properties, but is also true you won’t get rich overnight. The real estate market is often unpredictable, so it is important that you know what to expect regarding your return on investment. You can’t afford to be naive, and you need to be well funded. The best thing is to purchase a property that you can well afford and keep it as simple as possible.
Is purchasing an income property the best investment decision for you? Consider local market conditions, realtor advice, and real estate news or contact an agent to discuss your options.