NEW YORK, December 06, 2021 (GLOBE NEWSWIRE) – Real estate investing can be a smart financial decision to diversify a financial portfolio. But buying a first investment property can be difficult, and there are many financial implications to consider beyond the cost of ownership. This is where these five tips for buying a first investment property come in to make the process easier.
1. Keep your debt manageable
It’s okay to go into debt when buying a first investment property, but new investors will want to make sure their existing debt is under control before committing. Having too much unpaid debt can make it more difficult to qualify for a mortgage, and you don’t want to take out loans that you will have a hard time paying off.
This means looking at all current debts including car loans, student loans, credit cards, etc., and establishing an appropriate debt repayment plan if necessary. If an investor has a lot of high interest consumer debt, it may be a good idea to delay the purchase of investment property until the debt is in a more manageable location.
2. Build an emergency rental fund
Many investors are savvy enough to know that they will need to put down a down payment and cover closing costs and other real estate costs. But something can go wrong and require rental repair, just like something can go wrong in someone’s primary residence. This means that the creation of a new emergency fund is essential.
Many real estate investors recommend an emergency rental property fund that covers three to six months of expenses, including mortgage payment, taxes, etc. This way the account can cover the cash flow if the place is not rented for a few months. .
3. Think carefully about the location
When it comes to real estate, location is king. First-time homebuyers may be inclined to look to more promising areas, which is a great strategy for getting affordable housing.
It’s worth spending time finding a good location as it can determine everything from how the property is run (Airbnb, long term rentals for students, etc.)
4. Get insurance under control
There are several types of insurance that a person should consider when purchasing a rental property. Of course, home insurance tops the list because it is required by many mortgage lenders. But other types of insurance, like homeowner’s insurance and life insurance, are also worth considering.
A whole life insurance policy may provide for a death benefit payment, which could help cover the mortgage balance if the policyholder dies before it is paid off, and this type of policy can accumulate a loss. accessible cash value. And in an age when a lot of money can flow, extra savings is never a bad thing.
5. Decide if the owner is on the agenda
Real estate investors have options when it comes to buying a first investment property. They can manage the rental property themselves as the owner or pay a property management company to do so.
It is worth considering what it means to own a property and the legal responsibilities that go with it. The cost of hiring a property management company could generate a profit, but the benefit of not having to worry about day-to-day management can be invaluable.
The bottom line
Buying a first investment property is an exciting time. And when done right, it can turn out to be a successful financial move. Tips like paying off debt, building an emergency rental fund, finding the right location, checking insurance, and making property management decisions can help any new investor find their way. get on the right track.
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