Purchasing an investment property may be a great way to secure your future, or to enhance or diversify your portfolio. But investing in property, like other ways of making money, has its risks. To help minimize these risks there are a few things that you can do. Know where to look: The best place to look for investment property is an area that is experiencing growth. Why? If an area is growing, it will have new places to work, which require employees, who require a place to live. As the area becomes more crowded and property there becomes scarcer, the value of property will go up. Buy fixer-uppers: If you purchase a home that is in need of repair you should either 1) know how to make those repairs and have the time to make them, or 2) have enough money to pay someone to quickly make those repairs. Either way, you will want to get repairs made as quickly as possible, so that your property can start making you money. Even if you know how to make the repairs, you may want to sub-let some of them out so you are able to sell the home faster. In addition to the cost of doing the work, you should calculate the cost of how much the material to properly fix the property will cost. Once you have added the cost of labor and materials together (and make sure you are accurate!) subtract that amount from the cost that other comparable homes in the area are selling for. That will give you the maximum you should buy the house for. Of course, since it is an investment property, and you want to be making money on it, you should pay less than that amount. Another way to get a good deal on a house is to buy a foreclosed home. A foreclosure on a house takes place when the previous owner is unable to continue making payments on the home. Sometimes you can find great deals on foreclosed property. To find foreclosed property, look on the Internet or contact a local realtor, they often have a list of foreclosed properties in the area. Become a landlord: If you do not wish to buy a fixer-upper, and are looking for a property to rent out, you should first find out how much money you are able to borrow (and can afford to borrow) for an investment property. You should then decide if you want to live in a part of the rental property (for example, half of a duplex). Determine the cost of utilities in the area, sewer and water costs, and local taxes. You should figure these amounts into the amount you rent out your property for. You will also need to decide what type of property is best to buy. Oftentimes you dont have a choice and you have to take what you can afford, but if you have the money you have a lot of options, including apartments, houses, duplexes, fourplexes, and more. |
