The Do's and Don'ts of Buying Investment Property
LOUISIANA REALTORS • July 17, 2017
Investing in real estate
can be a great investment. Not only can it grow in value over time, but it can also provide a continuing income source. However, as with any investment, it is important to understand the risks. Unlike the stock market, where you can invest in smaller increments, real estate requires a much more significant investment. Here are few things to make sure that you do, and few to avoid before you buy your first investment property.
Do Make Sure an Investment Property is For You
Owning a second home means even more responsibility, especially when it comes to repairs and maintenance. Handling these tasks yourself can save a lot of money. It’s important to consider the extra time and cost of owning a second property before you commit.
Don’t Try and “Flip” a Property
While this may seem like a fun way to turn a profit, at least for your first investment home, this is not a good idea. The cost of doing a major overhaul on a property can easily get out of hand, making it even more difficult to get your money back from a rental or even a sale.
Do Hire a REALTOR®
Just as you would with your primary residence, seek the knowledge and expertise of a REALTOR®. Understanding market value is crucial when it comes to investing and knowing what areas are growing, and what areas aren’t can position you for a successful investment. REALTORS® also have strong professional networks. Mortgages for investment properties are different than for your primary home, so having access to mortgage brokers, banks, and other professionals can help you get the best deal.
Don’t Underestimate Your Margins
Obviously there will be costs associated with owning this second property and it’s vital to understand them all to ensure that you are earning a return on this investment. HOA fees, insurance, and maintenance will all eat in to your bottom line. It is also a good idea to budget, save, and plan for any major repairs and for vacancies when you won’t have a revenue stream, but will still have these obligations.
Investing in real estate can be fun, exciting, and lucrative. Before you jump in feet first it is important to understand the ins and outs of owning an investment property in terms of everything from responsibilities, liabilities, costs, and management.
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NAR is pleased to share the latest consumer guide offering homeowners factors to consider when deciding whether to sell their home. The guide includes seven discussion points to help potential sellers think through the decision with the help of a real estate professional who’s a REALTOR®. As a reminder, all guides in this series are available for download—in both English and Spanish—on facts.realtor . Please allow up to two weeks for the Spanish version of the latest resource to be translated and uploaded. For ease of reference, below is a list of the most recent guides: NEW: Thinking of Selling? 7 Factors to Consider How to Make Your Home More Energy Efficient Can’t Pay Your Mortgage? You Have Options 8 Tips for Selling Your Home in Winter Hiring a Remodeling Contractor Real Estate Contract Contingencies Thank you for your continued engagement with the “Consumer Guide” series and for sharing the resources with prospective clients to ensure they have the information they need to find success in their home buying or selling journey. Remember that these guides are for informational purposes only and are not meant to enact or change any existing NAR policy. Be on the lookout for the next consumer guide, which will look at factors to consider when deciding whether to purchase real estate as an investment.
