Skip to Content

Investment Property Buying 101

Happy Couple with Woman Holding KeysIf you’ve been inquiring about a stable, long-term investment in Heber Springs, residential rental homes can be the investment you’ve been yearning for. But you have to know that buying an investment property is not similar to purchasing a residence. You will need to figure out quite a lot of things to really make certain that your first investment property has a favorable outcome. To get you started, we’ve discussed here the basics of buying an investment property for you. By taking advantage of this guide, you can, for sure, more confidently find and buy your first residential rental property.

How It Works

The idea behind buying an investment property is a pretty straightforward one: investors purchase a property with the goal to lease it to a tenant. This buy-and-hold model is one of the most typical practices that real estate investors begin to create their property portfolios. Although you need to be aware that there are many significant differences between buying a primary residence (in which you mean to live) and buying a rental property.

Among the most crucial mistakes a first-time investor makes is to procure a property they desire and would enjoy moving in. This can bring about poor decision-making, primarily if you find yourself emotionally attached to a particular house. On the other hand, investors smartly use a set of calculations and market comparisons to know and evaluate properties they want to buy. Some of the figures you’ll have to understand include the fair market value, the fair market rent, and your expected return on investment (ROI). By examining comparable properties in the neighborhood, as for instance current rentals, you should clearly and swiftly begin distinguishing which properties are bound to generate profitable rentals and which ones should be utterly avoided.

A particular way that buying an investment property is different from buying a primary residence is financing. Financing an investment property can be truly challenging on the account that most lenders will easily ask for upwards of 20% down on any mortgage. You will furthermore want to be sure that you have cash on hand in excess of your down payment to cover closing costs, repairs, and costs related to preparing the rental and finding your first tenant. Consequently, it’s necessary to start the financing process at the earliest possible time so that this way, whenever you locate the rental property you’ve been waiting for, you can move speedily to make it yours.

What to Look For

One key feature of a great rental property is that it qualifies and meets a very specific set of criteria or list of attributes. These criteria should encompass the location, size, amenities, and condition of the property and details with respect to the local rental market. You want to know what type of people are renting single-family homes in your particular area and what they are expecting in a rental home. By researching and having a conversation with rental property experts, real estate agents, and other housing market experts, you can learn a lot when it comes to who your potential renters will be and what type of property will best satisfy their needs.

Following that, the hunt for bargains now truly begins! To securely help maximize your monthly cash flows and, thereafter, your resale value, rental property investors oftentimes go in search of properties sold below market value. Needless to say, this may also mean that the property is older or calls for quite a few renovations and repairs. Be certain to calculate the costs of these repairs into your operating budget.

How Long Does It Take?

There is no set time for buying a property. Other investors will use as little as a few months finding and totally completing their purchase, conceding that for others, the process may take over a year from actual start to the end. The average time to close on a mortgage in 2020 was about 60 days, though that does not count the time spent looking for the right property. Your buying process may be longer or shorter, subject to a wide range of variables.

The most important thing to ascertain is that you should avoid rushing the process or feeling pressured to purchase the first property you just saw considering that you have some deadline set for yourself. Each property purchase is totally different, and every so often, obtaining the right property takes a bit of time. However, taking the time to crunch the numbers, find the right bargain, and keep doing what is right may more likely turn out well for you.

If you are in the market for your first investment property, you need to find the right experts on your team. Why not give Real Property Management Delta a call? Our team of Heber Springs 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 are equipped with the correct knowledge going into your first deal, the more certain you can grow into a successful rental property owner. Contact us today!

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.

The Neighborly Done Right Promise

The Neighborly Done Right Promise ® delivered by Real Property Management, a proud Neighborly company

When it comes to finding the right property manager for your investment property, you want to know that they stand behind their work and get the job done right – the first time. At Real Property Management we have the expertise, technology, and systems to manage your property the right way. We work hard to optimize your return on investment while preserving your asset and giving you peace of mind. Our highly trained and skilled team works hard so you can be sure your property's management will be Done Right.

Canada excluded. Services performed by independently owned and operated franchises.

See Full Details