Pitfalls of buying an investment property to rent
“Which property is good for renting?” is a question that should be asked when buying a property for rent as an investment. Here are some advices:
- 1. Be in the known. It is important to know how your potential investment property will serve you. Is it for rent? Is it to be renovated and be sold for profit?
- 2. Knowing the location that would generate the most rental revenue. The properties should have these traits: low crime rates, high population growth, growing job market, best rental prices, close to schools, shopping, restaurants, and public transportation, many development projects in the works, low property taxes, low insurance costs, and favorable landlord-tenant laws.
- 3. Take a step back. Remember to do the math on expenditures and return on investment- “rental property analysis” before getting too wound up with the property. Select property analyzing tool that give you the best estimate so that you can avoid loosing money in the long run.
- 4. Make sure to have some sort of emergency funding. Rental properties are not always guaranteed to be occupied by tenants. There are also maintenance costs associated with renting out the property. There must be at least 6-month cash back-up amount to cover unforeseen circumstances.
- 5. Overpaying. Young investors can overpay for their property due to that sense of attachment, excitement and impulses. The property in the end can cost more than what the rental revenue can generate. In this turn would put the investor in greater debt that is needed to pay off before getting a great return on the investment.
- 6. Skipping to inspect the property. Some properties may look good but carry with them hidden repairs that are needed to be fixed once acquired. These hidden repair costs can go over the return on investment which would become a burden for the property owner. Thus, it is always a good idea to bring a constructor along when looking at properties.
- 7. Wrong financing. Always choose the best financing options by checking out many lenders and exploring other financing options. This in the long run would save the homebuyer money and generate that return on investment fast inside to struggling to make mortgage payments.
Key words: real estate, rental property, young investor
Work cited: https://www.mashvisor.com/blog/buying-an-investment-property-to-rent-pitfalls/
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