Real estate has been the choice of world's
wealthiest people, so there are ample reasons to think that buying a property
is a sound investment. However its a known fact that with any investment,
better to be well-informed before diving in with your hard-earned money.
It's tough being landlords?
Do you know much about repairing leaking
walls or unclogging a toilet? Definitely, you will call somebody to do it for
you, but this will reduce your profits. Property owners having more than one
house tend to repair to save money. However this change as one adds more
properties to their portfolio. Experts say its better to put together a team of
cleaners, handymen, and contractors. But this isn't recommended for new
Pay Your Debts Before Purchase
Regular investors carry some debts in their
investment portfolio, but new ones must avoid it. Those have any loans, unpaid
bills or children going to attend a college in future, buying a rental property
might not be fruitful. Experts advise to pay down debts if returns are higher
than the cost of debt. Don't push yourself in a position when you lack cash to
make payments on your debt.
Secure Down Payments
Real estate properties require a higher
down payment than pre-owned properties. One needs at-least 20% down payment to
be made given that mortgage insurance isn't available on rental properties.
Beware Of Interest Rates
The interest rates on borrowing money might
be cheap in 2020, but its higher for investment property than traditional
mortgage interest rates. Have low mortgage payment if you want good monthly
Experts say that purchasing distressed
properties provide returns of 5%-7% as they have pay staff. Moreover individuals
must target a goal of 10% with annual property maintenance costs of 1% only.
For money that you invest, what are your
returns? Generally stocks offer 7.5% cash-on-cash return, while a bond offers
4.5%. In real-estate 6% annual return can be considered good, especially when the
number will rise in future.
Prefer Low-Cost Home
It's obvious that more expensive the home,
higher will be ongoing expenses. Experts recommend starting with a mid-range house
in upcoming neighborhood.
Selection of profitable rental property is
always dependent on the location having low property taxes and good amenities
nearby. Moreover low crime rate neighborhood and growing job market will definitely
return larger returns.
Always keep your expectations real. As any investment, especially rental
property will not produce a fat monthly paycheck for a while and selection of
wrong property will be a catastrophic mistake. Prefer working with a
professional real estate consultancy in UK
on your first property purchase or rent your own home to test your landlord