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Investment Property Buying 101

Happy Couple with Woman Holding KeysIf you’ve been looking for a stable, long-term investment in Charleston, residential rental homes might be the investment you’ve been looking for. Regardless, it’s safe to say that investing in an investment property is not equal to buying a residence. You will need to go over a few things so that you can make sure that your first investment property is a success. We’ve done the basics for you by listing down the things you should know when buying an investment property. This guide will allow you to make an informed decision when purchasing your first residential rental property.

How It Works

The concept of buying an investment property is a pretty straightforward one: investors purchase a property with the intent to lease it to a tenant. This buy-and-hold model is one of the most common ways that real estate investors start their property portfolios. But, take note, though, that there are key differences in purchasing a primary residence and a rental property.

First-time investors usually fall for the mistake of wanting to live in the property that they want to invest in. This can only lead to a clouding of your judgment because you’re emotionally attached to the property. Instead, investors use a set of calculations and market comparisons to find and evaluate properties to buy. Make sure to keep yourself updated on the fair market value, the fair market rent, and your expected return on investment (ROI). Once you observe the different properties listed in the current rentals of your neighborhood, you will be able to tell which ones are profitable for rentals.

Another way that buying an investment property is different from buying a primary residence is financing. Financing an investment property will most likely come with a 20% down on mortgage — this is what a lot of investors find challenging. You will need a bit of cash saved up after you make the down payment since there are other costs like the closing costs, repairs, and other rental funds to prepare the property for its first tenant. It’s very important for you to begin your financing process early so that you can immediately process a rental property once you set your eyes on one!

What to Look For

You should already know what features most renters want in a rental property. Your planning should include the location, size, amenities, and condition of the property and details about the local rental market. Research on the kind of people who rent single-family rental homes and try to find out what they look for in a rental home. By researching and talking to rental property experts, real estate agents, and other housing market experts, you can determine the possible renters you might have and what property they are after.

This begins the journey for the next bargain. To help maximize your monthly cash flows and, eventually, your resale value, rental property investors typically look for properties sold below market value. These properties, of course, will be older and in need of renovations and repairs. When planning your operating budget, remember to include these repairs.

How Long Does It Take?

Because it’s different for everyone, there is no set time for buying a property. If it takes you a few months or a few years, then go with that. Take your time because you don’t want to end up with any regrets. The average time to close on a mortgage in 2020 was about 60 days, plus added days spent on looking for the right property. It will always be a case-to-case basis for everyone since there are a variety of factors to consider.

It’s wise to not set a deadline for yourself. Why? This way, you can avoid rushing the process and avoid feeling pressured to buy your first property. Every property listed is a different scenario. It will take some amount of time to find the right one. However, if you do your due diligence, you will eventually find the right bargain for you, and it will turn out well in the end.

If you are in the market for your first investment property, getting the right team is a key decision! Why not give Real Property Management Distinguished Care a call? Our team of Charleston property managers helps investors determine fair market rent, perform comprehensive assessments on potential rentals, and even help you locate off-market deals. The more you know going into your first deal, the more confidently you can become a successful rental property owner. Contact us today!

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