From the budget to the area to the home itself, there are many different factors which newbie property investors have to chew over when they’re looking to take their first steps into the market. While property is generally safer than a number of other assets, making money from it is never a guarantee. Your success depends on all kinds of things, and one of these is buying the right property in the first place. Here are a few questions to ask yourself when looking for that first investment property.
What Can You Afford?
Before you even consider talking to a real estate agent, you need to determine exactly what you can afford to spend. Naturally you’ll start with a calculation of your monthly mortgage payments, but you need to go much further than that. Think about the current cost of a mortgage, and factor in the extra cost when interest rates go up. Next, you need to think about various additional costs, such as the tax on your rental income, insurance, agent’s fees, inspection fees, and ongoing maintenance. Finally, formulate a plan of what to do if you run into any issues with tenants, like those who refuse to pay their rent for one or more months. It will take time to either come to an agreement with the tenant, or execute legal action. You need to have a safety net in place for paying the bills during these tough periods.
Where Will You Target?
Having established a firm budget, you need to think about the area where you’re going to start scoping homes for sale. There are two main factors to think about here. First of all, the ideal location of your first investment property, and secondly, the practicalities of actually owning one there. If you’re planning to do a lot of the maintenance and servicing yourself, you should aim to buy something that’s relatively close to your actual residence. Fail to do this, and it will turn out to be impractical. You’ll also be more familiar with the local area, and may already have some idea of where people tend to rent. In the best-case scenario, you’ll be able to secure a place that’s appealing to tenants for a few specific reasons. It might be near a school or college, transport links, and so on.
What Will You Buy?
Having established the kind of person you want to rent to, you’ll be able to hone in on the right kind of property for your needs. If your ideal tenants are students, for example, they’ll want a house with several bedrooms so that they can rent it with some co-eds. If they’re young professionals just starting out on their career, a flat with one or two bedrooms may be more fitting. Always make a point of matching the property to the tenants you’re targeting. When you’re new to property investment, it can be easy to be naturally magnetized to the kinds of properties you’d like to live in yourself. Be aware of this, as it can actually lead to you repelling good tenants.