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Have you always wanted to buy an investment property? If yes, you may have had a lot of questions about selecting the right kind of building. To help you make an informed decision, we’ve set down some cardinal tasks that you need to perform when choosing an investment property.
- Narrow down on the ideal renter
Before you think about the property, envision the type of people you want renting it. Do you prefer students or working professionals? Are you okay with families with children or do you prefer retirees?Each type of person has specific requirements; for example, a parent will want the house to be close to a school. Select the property based on the profile of your potential renter.
- Calculate the mortgage you’ll need to borrow
Properties can get expensive, especially those in prime neighborhoods. Before you narrow down on your choices, visit a housing loan provider and check how much mortgage you will need to borrow.Total Mortgages offer housing loans at extremely borrower-friendly terms. Talk to a Mortgage Broker at Total Mortgages for more information.
- Check for property maintenance concerns
It’s always best to choose a property that doesn’t require too much fixing-up. Maintenance and repair work can be extremely expensive, the costs of which may force you to raise rental prices and risk losing out on customers.A well-maintained property will also fetch you better mortgage terms.
- Tally your potential rental earnings and expenses
When selecting an investment property, calculate the potential expenses you may rake up from utilities, maintenance & upkeep costs, taxes, housing insurance, homeowner association fees, vacancy rates and more.Next, estimate the potential earnings that you’ll make from the monthly rental you’ll receive from your tenants. You can always check the market value of the neighborhood your property is in and the value of the amenities you offer, to analyze how much earnings you can expect from them.
- Determine the appreciation rate of the property
There are very few assets which appreciate like property. Before making a choice, check whether the property has a potential for increasing in value of its own accord or if you need to revamp the property to increase its value. This will tell you if it’s worth the investment or not.Remember, it’s also okay to invest in property that can generate huge cash-flow, without actively appreciating in value.
- Identify the rate of capitalization
Finally, one of the most important considerations you need to take into account is the amount of time it will take for you to recover the investment you’ve made on your property. It’s good to choose a property which can help you break-even at the earliest, at the lowest possible costs.