Property Investment For Beginners- Some Important Tips

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5 Tips to be Consider for a Successful Property
Investment

• Prateek Group

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1. Rental Income Is Not 100 Passive
Do you think owning rental property is a
completely passive endeavor? Its far from it,
especially when you first get started. Theres a
lot of upfront work involved, not to mention
ongoing maintenance that needs to be
completed. While its possible to eventually
build a team that handles your investment
properties, its safe to assume youll need to be
involved from the get-go. Your rental empire
isnt going to build itself. You have to do the
research, get financing, make updates, and find
tenants. If you want a completely hands-off way
to build wealth, this isnt the solution for you.
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2. Lenders Are Sometimes Stricter With Financing
It can be difficult to finance a second property,
especially when its an investment property.
There are many ways to obtain financing, but in
general, you should be prepared with a down
payment of 20-25 of the purchase price of the
home. Like with any loan, it also helps if your
credit score is in excellent shape. You should
aim for a score of 740 or greater. Additionally,
you should shop around to find a lender that
understands your investment goals. Your lender or
broker should have experience financing
investment properties. Take a look at the rental
mortgage programs different lenders have, and
figure out which will benefit you the most. If
youre having trouble getting financing through a
big bank, try contacting a community bank in the
place youre looking to buy. They might be more
comfortable lending to you given their
familiarity with the neighborhood.
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3. Focus on Buying Cashflow Positive Properties
Not all properties make for good rentals. Its
imperative to do your research before making such
a large investment. Take time to do a thorough
market analysis of the area you want to buy in.
What are places renting for? How much are
properties selling for? Are rentals in demand, or
are there a lot of vacancies? What kind of
tenants is the area attracting? What type of
properties make for the best rentals? You
obviously want the property you end up buying to
be cashflow positive. Take into account what your
mortgage payment will be, what you can rent the
property for, and any other expenses (such as
property tax, insurance, repairs, and
maintenance) youre going to incur. Whats left
over? Is it enough to make the investment
worthwhile?
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4. Are You Prepared to be a Landlord?
Being a landlord isnt for everyone. You have to
be up for finding and screening tenants,
collecting past due rent payments, being on-call
24/7 in case problems arise, and more. You can
choose to hire a property manager, but thats an
additional expense and less money in your pocket.
Decide which is more important your revenue or
your sanity.
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5. Can You Handle the Costs?
Besides having a decent down payment, you
sometimes need to have at least six months worth
of mortgage payments in your bank account to
qualify for a loan on an investment property. As
a landlord, its important to have cash reserves
in case an emergency repair needs to be made. If
theres no hot water or air conditioning
available to your tenants, its your
responsibility to get it fixed and
quickly. Beyond that, you should be prepared in
case you need to bring the property you purchased
up to code. Local rental regulations are
different for every town.
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Rental Properties Are Hard Work
While investing in real estate isnt a bad idea,
you need to go into it with realistic
expectations. Its not easy to get out of the
market once youre in it. Devise a game plan for
the long haul, and dont rush into any decisions.