An American Community Survey conducted by the U.S. Census Bureau in 2016 reveals that 37 percent of American households (roughly 43 million families at the time) are renting their homes. This fraction hasn’t changed much since 1965 so it means the number of households choosing to rent instead of purchase a home is steadily increasing, and it’s not difficult to understand why.
Obviously, buying costs more than renting, and not very many people can afford even the least desirable units on the market. Furthermore, most of the houses for sale that come with great deals are located at the outskirts of cities, some even at the far corners of the countryside, which is not ideal for starting families. Renters also avoid yard work because most rental properties are ready for occupancy. That said, the market for rental properties is still healthy.
If you’re looking to start a business soon and you’re quite unsure of the type of business to invest in, consider an investment property. While it may be just as difficult to manage as any other business type, at least you’ll have a better chance at ROI. However, just because investment properties are a more secure business type than others doesn’t mean the whole process of acquiring one is easy. Here are some pieces of advice that can help you in making the right decisions.
- Get the Hang of the Process
- Choose a Type of Property to Rent Out
- Secure Financing and Manage Your Finances
You’ll most likely spend your entire life savings on this business, so it’s wise to learn its ins and outs before you shell out money. Take the time to do your research before making big decisions. Attend seminars, read books, and scour the Internet for reliable information that can help you choose options that make the most financial sense. Learn the process before you hire a consultant so that you can present your ideas and thoughts more easily and confidently. This way, your consultant can understand you better, and therefore provide the most helpful advice.
When it comes to residential property, there are a number of types you can choose from, including single-family home, condominium, townhouse, co-op, and multi-family home. You have to choose a type that will actually rent. The last thing you need is a rental home that takes months or even years to get occupied. Remember that the continuity of your business depends on whether or not you have tenants. Also, you have to know how much each unit in a particular location and investment property type will rent, as that would affect your net income.
The cost of owning and managing an investment property isn’t centered on the price of the property alone. Repair, maintenance, marketing, and taxes are outlays you have to consider as well. Know all of your costs and compare them against your capital. Then consider getting financing to cover the remainder. Expect mortgage to be your biggest expenditure; in most cases you’ll have to make up to 20 percent down payment. You have to factor in taxes and insurance that will be escrowed in the mortgage, too.
These tips will definitely help you get started on your plan to purchase an investment property. However, they only scratch the surface. The bigger portion of the iceberg will reveal itself as soon as you start transacting with real estate professionals. Keep yourself up-to-date with the latest investment news and information so that you’ll know when it’s ideal to purchase and which property type will rent best.