How to Make Your First Investment Property a Smashing Success
Today's post is a guest post from Katie Conroy at advicemine.com. Her website features advice on your health, career, relationships and personal finance. Today's post is how to make your first investment property a smashing success.
They say there is a learning curve to everything, and that definitely holds true when you’re investing in real estate. Choosing that first property can be a daunting decision, and on top of finding the right place, you want to manage it in a manner that ensures steady profitability. Here’s what you need to know to set yourself up for success.
Always Put Location First
The familiar expression “location, location, location” is more than just a platitude. This saying sticks around because of the truth it tells — where your property is will dictate its ultimate value. This is true whether you’re considering a long-term or short-term rental, and it is especially true when you want your property to be profitable.
The best and obvious objective is to select a property in a good neighborhood with easy access to key points of interest. Contemplate what is available, what sort of renter you want to appeal to, and sort your ultimate goals as you examine the options. Of course, you don’t want to overlook the home’s price; in New Brunswick, you can expect to pay around $357,500 on average for a home.
Fixer-Upper: Savvy Investment or Money Pit?
On the downside, properties in desirable areas tend to be very pricey. One dollar-stretching way to help finance your investment is to purchase a fixer-upper. To make this kind of purchase work, you need to crunch numbers carefully. In a popular location with sufficient rental pricing, you might be able to pick up a bargain property and start turning a profit pretty quickly. This is especially true if you can do some of the renovations yourself.
If you elect to make renovations, DIY or otherwise, be sure to put ROI at the top of your priorities. Kitchens and bathrooms generally rate high on the list of good choices, although property owners should steer clear of renovations that are too time-consuming or costly. Lengthy and expensive repairs can eat into your profits right off the bat.
What Types of Loans are Appropriate?
While several loan types are available for investment property mortgages, purchasing a property you don’t intend to live in means lenders are going to scrutinize your financial situation even more than usual. You might need to go the extra mile to ensure you qualify. That can mean things like having more cash stashed than you would for a traditional home loan and searching for lenders who are particularly investor-friendly.
Also, bear in mind that if you decide on a fixer-upper and you don’t have cash for the purchase, you might add a renovation loan to the mix. When going this route, make sure your credit is ultra tidy, and budget some extra for issues like delays and unforeseen repairs.
Running a Successful Rental
Finding a great location, purchasing it, and getting it ready for renters are giant steps. However, your day-to-day management will weigh heavily on the success of your property.
Part of that will include appealing to desirable renters, and you’ll need to decide what that means for your circumstances. Price is an obvious factor, but attracting your clientele should go beyond that. For instance, Apartment Guide notes that tenants particularly appreciate pet-friendly accommodations. On the other hand, Tokeet notes that vacationers like some luxurious extras like blackout curtains, outdoor entertaining areas, strong WiFi, and toys for swimming pools.
Additionally, you need to decide how to handle ongoing upkeep and renter issues. For many property owners, this means hiring a professional property manager. However, if you have the tools, time, and skills, you can always take that responsibility on yourself.
You have a lot to think about when investment properties are on your radar. Whether you opt for long-term tenants or vacationers, make finding a great location your first priority. Watch your pennies, and make sure your investment offers top appeal to renters. Thanks to your due diligence, a successful venture will be yours.