Have you decided to buy your first rental
property? Are you new to this type of investment? Is it safe to invest in real
estate industry? One of the industries with highest returns is the real estate
investment. You can never go wrong on this as it shows most of the wealthiest
people have as well invested in it. Yes, is the answer to if it is safe to
invest in real estate industry. You can never go wrong in this. However, you
need to learn the process of investment in the industry and the tactics that
would be involved in order to prosper in the industry. Here are some tips
on buying your first rental property;
Right Location
The heart of real estate investment is the location.
The location determines a lot in relation to the property. It determines
accessibility to social amenities as well as the value of the property.
Investment where the area is not growing-that is in population wise and
infrastructure-will have your money stuck instead of appreciating. While
investing in real estate, it is advisable to invest in areas with amenities
such as water, electricity, easier transportation and accessibility to working
zones as it will attract more renters.
Calculate your Returns
Before investing in rental property, it is
wise to determine the rate of returns of the investment. Calculate all the
operating costs; in terms of expenses and profit. Also, project the earning in
years. You will be able to determine whether the investment is long term or
short term invest-whether worth in future.
Determine rewards against risks
By determining your rewards against your
risks, you know whether the investment is making sense to you or not. Some of
the rewards include the value of real estate increasing translates to the value
of your investment rising. Another one is that real estate investment is more
stable than investing in stock markets as it can withstand most if the crisis
time. You invest in physical assets rather than products you cannot see or
touch. On the opposite note of rewards, rental income may not be able to cover
all the mortgage value and may need for you to find other sources of covering
it, making it one of the risks. Rental property is about the tenants. If one of
the spaces is not occupied by a tenant, you may be required to pay the expenses
still of the same space by yourself. Another risk is that in case of
immediate cash, you cannot sell real estate rental properties off faster unlike
other investments like stock.
Regardless, there is need to know the worth
of the rewards against risks worth.
Low cost rental property
The higher the cost of rental property, the
higher the expenses. It is necessary to consider buying a rental property with
minimal expenses. Remember the goal is to have minimal expenses while
harnessing high profits.
Buying on cash versus financing it through
loans
When it is your first rental investment, you
may be wondering if the best idea is buying it through cash or financing it
through a loan. This however depends on your investment goals. Buying in cash
can be more advantageous than financing through a loan as it can develop a
positive cash flow. Financing through a loan may have several expenses such as
interest rates which is not applicable if bought through cash.
Factor in unexpected costs
Real estate investments have several hidden
costs. It is necessary to think of such costs and know how to factor them in.
For example, you might buy a rental property near a road and soon the road
needs to be adjusted, how will you factor in such unexpected cost? Before
investing therefore, it is necessary to know what to avoid and what to
consider.
Investing in rental properties is one of the
best ideas one can enter into. It is important to consider the pros and cons of
these types of property especially if you are doing it for the first time.
