Skip to Content

Get a FREE assessment of your rental property. Start here!

Get a FREE assessment of your rental property. Start here!

Investment Property Buying 101

Happy Couple with Woman Holding KeysIf you’ve been searching for a stable, long-term investment in Greenwood, residential rental homes could be the investment you’ve been looking for. But you have to understand, buying an investment property is unlike purchasing a residence. You will need to know and understand various things to make sure that your first investment property has a positive and successful result. To get you started, we’ve defined the essentials of buying investment property for you. By making use of this guide, you can, with confidence, locate and obtain your first residential rental property.

How It Works

The thought of buying an investment property is a pretty straightforward one: investors purchase a property with the aim to lease it to a tenant. This buy-and-hold model has been classified among the most common methods that real estate investors initiate building their property portfolios. But take note, there are several main differences between buying a primary residence (in which you intend to live) and buying a rental property.

One of the most serious mistakes a first-time investor makes is to acquire a property they want and would appreciate living in. This can induce poor decision-making, particularly if you find yourself emotionally attached to a particular house. Rather, investors make use of a set of calculations and market comparisons to spot and evaluate properties to invest in. Some of the figures you’ll need to figure out include the fair market value, the fair market rent, and your expected return on investment (ROI). By examining comparable properties in the neighborhood, especially current rentals, you should speedily start to identify which properties you can make into profitable rentals and which ones should be avoided.

One other way that buying an investment property is different from buying a primary residence is financing. Financing an investment property can be a more tedious task because several lenders will require upwards of 20% down on any mortgage. You will moreover want to ensure 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. This is exactly why it’s very significant to start the financing process as soon as possible, such that when indeed you’ve found the rental property you’ve been looking for, you can quickly move to make it yours.

What to Look For

One key feature of prime rental property is that it suits a very specific set of criteria or list of elements. These criteria should include the location, size, amenities, and condition of the property and details as regards the local rental market. You have to know what type of people are renting single-family homes in your place and what they are going after in a rental home. By researching and conversing with rental property experts, real estate agents, and other housing market experts, you can figure out a lot with respect to who your potential renters will be and what type of property will best live up to their needs.

Thereafter, the hunt for bargains commences! To actually help maximize your monthly cash flows and, subsequently, your resale value, rental property investors mostly search for properties sold below market value. Naturally, this may specify that the property is older or warrants several renovations and repairs. Ensure 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. A few investors will spend as little as a few months finding and accomplishing their purchase, although, for others, the process may take over a year from beginning to end. The average time to close on a mortgage in 2020 was about 60 days, but really, that does not involve the time spent looking for the right property. Your buying process may be longer or shorter, contingent on a wide range of variables.

The most important thing to learn and understand is that you should avoid rushing the process or feeling pressured to purchase the first property you see since you have some deadline set for yourself. Each property purchase is certainly different, and occasionally, getting the right property takes a little bit of time. Though taking the time to crunch the numbers, find the right bargain, and carry about doing things the right way is a lot more likely to turn out favorably for you.

If you are in the market for your first investment property, you need to have the right experts on your team. Why not give Real Property Management Indianapolis Edge a call? Our team of Greenwood 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 perceive and know going into your first deal, the more assuredly you can get 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.