Knowing what to look for when purchasing your first investment property can be overwhelming, especially if you’re relying on information from multiple sources found online. While there are great resources out there including this blog, it’s often best to visit the property yourself and inspect things on your own, taking a long, hard look into the realities of the costs you’ll face.
Purchasing your first investment property can be an exciting endeavor that turns into a major profit center, but you have to balance what you pay for the property with other unexpected expenses. Things like maintenance, interest rates and equity value all determine whether you’ll have a profitable exit strategy.
You also need to weigh all your property options when purchasing your first investment property. Turnkey properties, for instance, have become a popular option since they save investors considerable time, money and hassle.
Key Things to Consider When Purchasing First Investment Property
The neighborhood in which you buy property factors heavily in the success of the investment. If renters don’t find the area appealing, they won’t lease from you. The key is to invest in markets that are rising — or are going to rise — in value, such as Northeast Ohio.
People want to live and work in vibrant, growing areas. Things to look for in a good neighborhood include areas where there’s little or no crime, good schools, convenient access to shopping and dining options, water access and views, and access to public transit and/or freeways.
If you don’t want to do all the heavy lifting when purchasing your first investment property — and don’t have the time, resources or ability to manage and maintain the property — turnkey properties are the way to go. When you work with a good real estate investment firm that offers turnkey properties, those opportunities lead to pure passive income.
Everyone wants to invest their money in a way that makes it grow consistently, but not everyone knows where to begin. Real estate is a smart way to diversify your portfolio, but it can be intimidating. With turnkey properties, you can safely diversify your investment strategy with a real estate play that promises immediate cash flow and long-term success.
Tread lightly with fixer-uppers
When purchasing your first investment property, buying a “fixer-upper” can be a great option, since you can usually get the property at a lower cost. However, you need to be fully aware of what problems need addressing, and ensure that you have enough capital to solve those problems. If you’re realistic about what it will take to get the property up to snuff (time, materials, labor costs, etc.), you can get a good picture of whether or not it’s a good investment. Cosmetic upgrades are generally easy, inexpensive fixes. But if the property needs major structural repair, you may better off avoiding the purchase altogether.
Avoid Retail Market Value
Almost every real estate expert says you shouldn’t buy property at retail value since you want equity in the property as a future cushion if you have to sell fast. Always make sure you buy at a 10-20 percent discount from current market value so you leave room for profit during your future exit strategy.
Your planned liquidation date can yield substantial profit if equity in the property is already healthy at first purchase.