5 Factors You Need To Consider Before Purchasing A Property
Purchasing your first property is a big investment which requires proper consideration because of the risks involved. It doesn’t matter whether you are purchasing a property for rentals or to resell it afterward. Investing in a real estate property requires a good amount of money, which makes it necessary to take the right steps to prevent a loss and ensure you get a return for your investment. Of course, the first thing you need to do before purchasing a property is conduct a thorough research. Location is always a key consideration when it comes to purchasing a property. During your research, you need to ascertain that the property is situated in a good location where it can attract the right customers you wish to rent to or sell to. When you do this, it will make your property more appealing to the market. The following are other factors you need to consider before purchasing a property.
1. Financing option
It can be overwhelming to finance your first investment property if you are a home buyer. This is especially true if you do not have money to purchase a property. Luckily, there are different financing options which you can consider such as a mortgage, hard money lenders and private money lenders. It goes without saying that mortgage is the most common financing option of the three. Private money lender could be your family, co-worker, friend or relative, which makes it easier to obtain the loan. On the other hand, hard money lenders are companies or individuals who offer loan to real estate investors.
2. Different types of investment properties
You cannot purchase a property without considering the different types of investment properties available today. They include single family homes, multi-family homes, condos, and townhouses. As the name suggests, single-family homes are properties which accommodates a single family. Multi-family homes have two or more housing units thus they generate positive cash flow. Condos are large apartments housed in a single building while townhouses refer to residential properties that are commonly found in urban areas.
3. Invest in a low-cost home
Perhaps you may be willing to invest up to a million dollars in a property but experts advise you invest in a low-cost home if it is your first investment property. The ideal price for a low-cost home is $150000. Remember that you will need to spend extra money on renovation if you want to sell or rent it out. You can quickly and easily sell your house through socal home buyers if you are tired of landlording or you want to relocate.
4. Do a market research
If you want to enjoy a good return on your investment, you need to do proper market research and define your target areas. Make sure you align this with your investment strategy and motivation. While doing your market research, you should focus on property within your city or neighborhood. To get the most out of your investment, look for factors such as strong housing demand, low vacancy rates, sustainable job growth, and high population growth rate.
5. Keep emotions aside
Most homebuyers let their emotions play a part when deciding which home to buy. While this is normal because you will be living in that home you are about to buy, you should not let your emotions affect your investment decisions. Whether it is a social home, rental home or a residential home, you should think of it as a business decision and try to get the best price out of it.
When buying your first property, it is important you focus on a property that will give you a high return on investment. That is why it is vital you buy properties with positive cash flow. To achieve this, make sure the expected amount of income of the property you wish to buy outweighs the annual expenses. If it is a rental property, factor in the risks involved such as duration it could remain empty between renters or legal cost involved when evicting a bad tenant. Keep in mind these factors if you want to avoid making a costly mistake when purchasing a property.