Buying an Investment Property

Are you ready to buy an income property? Here are some things to consider.

12 Tips for Buying and Investment Property

1. It’s all about location! Buy a property in the best location you can afford. It will determine the kind of renters you will attract, and just how much rent you can charge. An investment property in a desirable neighborhood will also appreciate more over time. It will also be less susceptible to the ups and downs of the real estate market.
2. You don’t need to go overboard when you’re fixing up a rental property. You don’t need to put in granite countertops and stainless steel appliances. Expect some wear and tear when the renters move out. Most tenants are totally happy with homes that are clean, light and bright.
3. Flipping? Forget it! Real estate today is a buy-and-hold investment—for at LEAST five to ten years. You’ll face considerably more risk with a shorter time frame. Although your income property will almost certainly appreciate over the next 20 years, the next few years are anyone’s guess.
4. When it comes to investing, think long term. For most small investors, long-term ownership makes the most sense. You’ll have plenty of time to ride out any swings in the market, and your rental income will be a nice supplement to your day job. Historically, real estate has been an excellent investment, always appreciating a few points over the rate of inflation, and always out-performing the stock market. Food for thought: Most people who bought homes in 2000 have realized 55% appreciation by 2010.
5. Have a big stash of cash. These days, buying an investment property requires at least 25-30% down.
6. Calculate the cost of ownership. This includes ALL the expenses of owning and managing an investment property, not just mortgage payments. Common expenses include property taxes, insurance, utilities, maintenance, and repairs.
7. Look for a property for what it can be, not what it is. Buyers with a little imagination can look past the cracked paint and overgrown landscaping and score a great deal.
8. Hire and pay skilled workers to do your renovations. Start collecting recommendations for electricians, plumbers, painters, and contractors.
9. Choose your tenants wisely. A good tenant is worth his weight in gold. Run a credit check and call old landlords. Ask if they paid the rent on time, what condition the property was when they left, and if they caused any problems with the neighbors.
10. Brush up on your rights as a landlord. Learn about the eviction process and other potential issues so you can do things right, saving time and money.
11. Carefully consider all options. In general, buildings with 3-4 units or duplexes pencil out best, followed by single family homes with 3 bedrooms. Some investors find it works out great to buy a duplex and move into one of the units.
12. Enjoy the cash flow! When managed correctly, investment properties are a great source of passive income—now, and when you retire. Take advantage of amazing tax benefits to make your investment pay off!

Thinking about Buying an Investment Property in Coronado, CA or San Diego, CA?

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