Four Questions Potential Buyers Should Consider Before Purchasing An Investment Property

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April 14, 2017

Four Questions Potential Buyers Should Consider Before Purchasing An Investment Property

Property Investment written on notebook with model of house and dollars.Here are four questions potential buyers should consider before purchasing an investment property.

  1. What are your financial goals? You should create rules to help stay focused. For instance, are you looking to make money by way of monthly rent checks, or is this a long-term appreciation investment where you look to cash out upon the sale of the property in a few years? These rules should be tailored to the buyer’s short and long term goals.  You should also set clear objectives as it relates to the amount of time and money you are willing to invest to improve the property.  These issues should be clarified and formulated into an individual road map that will help you evaluate your objectives before you enter the market place.  And you should not deviate from your criteria for deal-breakers in any investment property you are considering.  Stick with your plan and do not deviate from it once you enter the market place.
  1. Can you afford the extra expenses? You should create a reserve fund in anticipation of purchasing a new property. Buyers are reminded that there are normally many expenses including taxes, association dues, management, maintenance, and repairs.  Furthermore, for tax purposes, buyers should keep their personal and investment accounts separate.  Moreover, as with the purchase of any property, there is always the prospect of hidden expenses that the buyer did not anticipate at the time of purchase.  So make sure you have funds on hand to address these issues as they are incurred.
  1. Which real estate market is right for you? Although some experts recommend buying in up-and-coming locations, others believe a good deal leads to a better returns. The buyer should look beyond their own zip code and research all their options, from foreclosures to pre-construction, to find the properties which will produce the best income as defined by the buyer’s financial goals set forth in number 1 above.
  1. Are your finances and credit in good shape? Most rental mortgages require a larger down payment than the purchase of a primary home. Buyers should look to see if they qualify for an FHA loan and if not, start reviewing their financial information in order to secure a standard mortgage loan.