Buying investment property could be a great way to prepare for a comfortable retirement. Real estate investing provides big returns, but successful property investors make sure they know what they’re doing before buying that first piece of real estate. Here’s what successful investors do.
1. Successful Investors Save for a Bigger Down Payment
When you buy your first home, you only have to put down 3%, but with an investment property, the required down payment is at least 20%, so property investors save until they have enough money for that down payment. Keep in mind that this amount is in addition to the money everyone should be saving anyway. It’s always a good idea to have enough to tide you over a few months in case you lose your job. You should also have an emergency fund for unexpected costs.
2. Successful Investors Do Their Homework
Successful property investors do their research and buy homes in an area tenants want to live in. Renters tend to have children and want to live in a neighborhood with good schools. California Property investors always pick safe neighborhoods with good schools for investment properties.
3. Successful Investors Get Debt-Free First
Wise property investors don’t get into any type of investment until they’ve paid off all of their debts. Anyone who is paying interest on accrued credit card debt or has outstanding student loans isn’t in a position to be investing.
4. Successful Investors Obtain Landlord Insurance
While borrowers are always required by the lenders to get house insurance, smart investors also obtain landlord insurance. It covers the cost of repair for damages inflicted by tenants as well as legal fees. Landlord insurance also covers lost income while the property is being repaired.
5. Successful Property Investors Shop Around for a Mortgage
Different lenders have different rates and terms as well as required points, so wise investors shop around to make sure they get the best loan for their investment properties.
6. Successful Investors Plan for Expenses
When it comes to investing it pays to be a little paranoid. Smart investors come up with a realistic idea of the type of return they can make before they buy that property. Typically it’s 10% per year.
7. Successful Investors Find Homes They Wouldn’t Mind Living In
A good rule of thumb is if you’d like to live there, your potential tenants will as well. Smart investors buy houses they like in case they can’t rent them. They can live in them until the market changes.
8. Smart Investors Know That Turnkey Properties Are the Best
The best first-time real estate investments are homes that are ready to be moved into. Property investors do make money buying and flipping real estate, but such a home shouldn’t be the first investment. Unless you’re an expert carpenter, you’ll have to pay someone to do that remodeling for you, and you likely won’t see a return on your investment. That’s why smart investors look for turnkey properties, meaning homes they can close on one day and then offer to be rented out the next.
9. Find a Good Property Management Company
Few people have the skills or the personality to be a landlord. Not only do you have to vet prospective tenants, but you also have to collect the rent each month and evict tenants who don’t pay. If you pride yourself on being a nice person, being a landlord likely isn’t for you, so hire a property management company to do it for you. Read online reviews to find a good company. They’ll be worth the 10% they charge each month.
By doing what smart investors do, you’ll provide yourself with a golden retirement. Contact Insurance by Castle for information and landlord insurance.