{"id":4925,"date":"2021-09-16T04:13:57","date_gmt":"2021-09-16T04:13:57","guid":{"rendered":"https:\/\/variedinvestor.com\/?p=4925"},"modified":"2021-09-16T04:27:29","modified_gmt":"2021-09-16T04:27:29","slug":"investing-tips-first-investment-property","status":"publish","type":"post","link":"https:\/\/variedinvestor.com\/investing-tips-first-investment-property\/","title":{"rendered":"5 Real Estate Investing Tips for Buying Your First Investment Property"},"content":{"rendered":"\n<p>Are you considering buying your first investment property? Well, it\u2019s not surprising. Real estate investment is very lucrative \u2014 despite the COVID-19 pandemic.&nbsp;<\/p>\n\n\n\n<p>According to the <a href=\"https:\/\/www.nar.realtor\/research-and-statistics\/housing-statistics#\" target=\"_blank\" rel=\"noopener\">National Association of Realtors<\/a>, median house prices surged between May 2020 and 2021, reaching a whopping $66,000. What\u2019s more, 91 of the 100 largest cities in the U.S. have seen <a href=\"https:\/\/www.apartmentlist.com\/research\/national-rent-data\" target=\"_blank\" rel=\"noopener\">rent increases <\/a>over the last year.&nbsp;<\/p>\n\n\n\n<p>Besides providing steady cash flow, your property can also serve as the backbone of your retirement. Indeed, the real estate market offers the quickest way to accumulate long-term wealth.<\/p>\n\n\n\n<p>Be that as it may, buying an investment property is like any other business venture with several risks. As such, it\u2019s vital to understand the basics of the business before diving in with your hard-earned cash.<\/p>\n\n\n\n<p>That\u2019s where this post comes in.&nbsp;<\/p>\n\n\n\n<p>In this article, we\u2019ll explore essential tips to help you purchase your first investment property. First, let\u2019s address a vital question.&nbsp;<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-663aecdabdc20\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-663aecdabdc20\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/variedinvestor.com\/investing-tips-first-investment-property\/#Is_Buying_an_Investment_Property_Right_For_You\" title=\"Is Buying an Investment Property Right For You?&nbsp;\">Is Buying an Investment Property Right For You?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/variedinvestor.com\/investing-tips-first-investment-property\/#Five_Tips_for_Buying_Your_First_Investment_Property\" title=\"Five Tips for Buying Your First Investment Property\">Five Tips for Buying Your First Investment Property<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/variedinvestor.com\/investing-tips-first-investment-property\/#1_Do_Your_Research\" title=\"1. Do Your Research\">1. Do Your Research<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/variedinvestor.com\/investing-tips-first-investment-property\/#2_Secure_a_Down_Payment\" title=\"2. Secure a Down Payment\">2. Secure a Down Payment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/variedinvestor.com\/investing-tips-first-investment-property\/#3_Calculate_Your_Margins\" title=\"3. Calculate Your Margins\">3. Calculate Your Margins<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/variedinvestor.com\/investing-tips-first-investment-property\/#4_Dont_Forget_the_Unexpected_Costs\" title=\"4. Don\u2019t Forget the Unexpected Costs\">4. Don\u2019t Forget the Unexpected Costs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/variedinvestor.com\/investing-tips-first-investment-property\/#5_Consider_a_Low-Cost_First_Investment_Property\" title=\"5. Consider a Low-Cost First Investment Property\">5. Consider a Low-Cost First Investment Property<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/variedinvestor.com\/investing-tips-first-investment-property\/#Wrapping_Up_Weigh_the_Risk_vs_Reward_of_Buying_Your_First_Investment_Property\" title=\"Wrapping Up: Weigh the Risk vs. Reward of Buying Your First Investment Property\">Wrapping Up: Weigh the Risk vs. Reward of Buying Your First Investment Property<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_Buying_an_Investment_Property_Right_For_You\"><\/span>Is Buying an Investment Property Right For You?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The answer is yes, no \u2014 or maybe. The answer is not as straightforward as you might imagine.&nbsp;<\/p>\n\n\n\n<p>Admittedly, individual investors account for <a href=\"http:\/\/housingperspectives.blogspot.com\/2017\/08\/who-owns-rental-properties-and-is-it_18.html\" target=\"_blank\" rel=\"noopener\">74.4 percent of rental properties<\/a> in the United States. However, buying an investment property can be challenging for the faint of heart.&nbsp;<\/p>\n\n\n\n<p>Besides worrying about mortgage payments, there are also the hassles that come with bad tenants. Other challenges include:&nbsp;<\/p>\n\n\n\n<ul><li>Market volatility<\/li><li>The massive gap between bid and ask<\/li><li>Increased liability<\/li><li>Low rental and occupancy rates<\/li><li>Eviction of delinquent tenants<\/li><\/ul>\n\n\n\n<p>Yes, it sounds like a gamble \u2014 we know. But the small risk also comes with an opportunity for a massive reward.&nbsp;<\/p>\n\n\n\n<p>According to a <a href=\"https:\/\/www.wealthmanagement.com\/sfr\/rental-yields-not-price-appreciation-drive-current-single-family-investments\" target=\"_blank\" rel=\"noopener\">report<\/a>, the average gross yield for rental investors was 9.4 percent in 2016. To put things in perspective, the average annual return on the Dow Jones over the last ten years has been 4.8 percent.&nbsp;<\/p>\n\n\n\n<p>The bottom line is buying investment properties can be lucrative for investors that have mastered the basics. And that brings us to the subject.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Five_Tips_for_Buying_Your_First_Investment_Property\"><\/span>Five Tips for Buying Your First Investment Property<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Several advertising researchers suggest that our emotions play a significant role in buying decisions. And that\u2019s acceptable when buying a place where you intend to live for many years.&nbsp;<\/p>\n\n\n\n<p>However, buying an investment property is purely business. As such, emotions will only prevent you from securing the best deals.&nbsp;<\/p>\n\n\n\n<p>Here are other real estate tips for buying your first investment property.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Do_Your_Research\"><\/span>1. Do Your Research<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The process of buying your first investment property should begin with in-depth research.<\/p>\n\n\n\n<p>The aim here is simple \u2014 to attract your ideal clients. That means you have to research the clients that you intend to sell or rent to beforehand. After that, you can explore the investment property options that might appeal to that specific market.&nbsp;<\/p>\n\n\n\n<p>Again, it\u2019s essential to put your emotions aside during research. In other words, it\u2019s best to avoid picking a property based on personal likes and dislikes.&nbsp;<\/p>\n\n\n\n<p>Instead, consider taking an analytical approach that\u2019s based on financial factors.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Secure_a_Down_Payment\"><\/span>2. Secure a Down Payment<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>At this point, you\u2019ve conducted research and picked the ideal investment property for your prospects. The next step is to make a down payment.&nbsp;<\/p>\n\n\n\n<p>There\u2019s just one thing. Investment properties usually require a larger down payment than owner-occupied houses. That means the 3 percent down payment that you may have put down for your current home won\u2019t cut it for a rental property.&nbsp;<\/p>\n\n\n\n<p>Since mortgage insurance isn\u2019t available for rental properties, they often require a 20 percent down payment.&nbsp;<\/p>\n\n\n\n<p>The good news is bank financing such as a personal loan can help secure a downpayment for your first investment property. But, you should also expect several stringent approval requirements.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Calculate_Your_Margins\"><\/span>3. Calculate Your Margins<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It\u2019s best to calculate your expenses and profits before purchasing a specific investment property.&nbsp;<\/p>\n\n\n\n<p>Yes, the savviest real estate investors always consider every detail beforehand. It begins with calculating how much you have and what you need to borrow to buy the property.&nbsp;<\/p>\n\n\n\n<p>After that, you may want to consider the house\u2019s renovation and operating costs. These include:&nbsp;<\/p>\n\n\n\n<ul><li>Homeowners association fees<\/li><li>Property Taxes<\/li><li>Monthly expenses such as landscaping<\/li><li>Staff payment<\/li><\/ul>\n\n\n\n<p>A rough idea of your operating cost makes it easy to estimate how much to list your property. More importantly, you can determine the profit to expect from your first investment property.&nbsp;<\/p>\n\n\n\n<p>For example, Wall Street companies that purchase distressed properties often target 5 to 7 percent returns.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_Dont_Forget_the_Unexpected_Costs\"><\/span>4. Don\u2019t Forget the Unexpected Costs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Operating a rental property often involves dealing with several unexpected expenses. Besides regular maintenance and upkeep, there\u2019s always a potential for an emergency repair.<\/p>\n\n\n\n<p>For example, roof damage could occur during a hurricane, or leaky pipes could ruin the kitchen floor.<\/p>\n\n\n\n<p>So, it\u2019s best to dedicate roughly 20 to 30 percent of your rental income to these unexpected expenses. While you may not hit half of the estimated expense, the calculation will help tailor your expectation.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5_Consider_a_Low-Cost_First_Investment_Property\"><\/span>5. Consider a Low-Cost First Investment Property<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It\u2019s tempting to invest millions of dollars into your <a href=\"https:\/\/www.webuycaliforniahousesforcash.com\/\" target=\"_blank\" rel=\"noopener\">first investment property<\/a>. However, that might not be the best strategy.&nbsp;<\/p>\n\n\n\n<p>According to real estate investment experts, it\u2019s best to pick rental properties that lie in the lower to mid-range price bracket.&nbsp;<\/p>\n\n\n\n<p>For instance, you could buy a house that costs between $150,000 to $250,000. That way, you\u2019ll have additional money to spend on repairs and renovation before renting or selling the home.&nbsp;<\/p>\n\n\n\n<p>Besides, keeping your investment as low as possible could help manage risk. While you may not hit unprecedented profit, you wouldn\u2019t lose too much either.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Wrapping_Up_Weigh_the_Risk_vs_Reward_of_Buying_Your_First_Investment_Property\"><\/span>Wrapping Up: Weigh the Risk vs. Reward of Buying Your First Investment Property<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every financial decision comes with risks and rewards, and real estate investment is no different.&nbsp;<\/p>\n\n\n\n<p>On the one hand, tenants can be a headache to deal with \u2014 unless you use a property management company. Also, your rental income might not cover your total mortgage payment.&nbsp;<\/p>\n\n\n\n<p>On the other hand, real estate is a tangible physical asset whose value is relatively more stable than the stock market. Besides, a rental property can serve as an excellent source of passive income.&nbsp;<\/p>\n\n\n\n<p>So, it\u2019s best to set realistic expectations. Also, you may want to work with an experienced investor on your first property.&nbsp;<\/p>\n\n\n\n<p>Alternatively, you could rent out your home for a limited period to test the process.&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Are you considering buying your first investment property? Well, it\u2019s not surprising. Real estate investment is very lucrative \u2014 despite the COVID-19 pandemic.&nbsp; According to the National Association of Realtors, median house prices surged between May 2020 and 2021, reaching a whopping $66,000. What\u2019s more, 91 of the 100 largest cities in the U.S. have<\/p>\n","protected":false},"author":1,"featured_media":4926,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[2,41],"tags":[],"_links":{"self":[{"href":"https:\/\/variedinvestor.com\/wp-json\/wp\/v2\/posts\/4925"}],"collection":[{"href":"https:\/\/variedinvestor.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/variedinvestor.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/variedinvestor.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/variedinvestor.com\/wp-json\/wp\/v2\/comments?post=4925"}],"version-history":[{"count":0,"href":"https:\/\/variedinvestor.com\/wp-json\/wp\/v2\/posts\/4925\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/variedinvestor.com\/wp-json\/wp\/v2\/media\/4926"}],"wp:attachment":[{"href":"https:\/\/variedinvestor.com\/wp-json\/wp\/v2\/media?parent=4925"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/variedinvestor.com\/wp-json\/wp\/v2\/categories?post=4925"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/variedinvestor.com\/wp-json\/wp\/v2\/tags?post=4925"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}