If you’re ready to start investing some of your money and building your wealth, one great way that people often dip their toes into this water is through purchasing an investment property. But while this might seem like an easy task, obtaining and owning an investment property is often much more complicated than it looks.
So to help ensure that you’re able to make smart financial decisions with this investment opportunity, here are three tips for buying your first investment property.
Have A Firm Grasp On The Finances
Before you even start looking at investment properties to purchase, the very first thing you should do is ensure that you have a firm grasp on your finances and what you’ll need financially in order for this investment to work out for you.
According to DC Fawcett, a contributor to Forbes.com, you’ll want to at least figure out what your expenses and profits will be before you take on an investment property. Without knowing what your true costs will be and what you’re going to need to be making off your property in order to make a profit, you could wind up making a very unwise investment decision. But by knowing all this information beforehand, you increase your chances of making a good financial decision rather than a decision based on emotions.
Don’t Get Blinded By A Fixer Upper
When looking for your first investment property, many people are falsely enticed by the idea of getting a fixer-upper in order to save themselves some money. However, this isn’t usually the best idea for your first investment property.
Rather, Tim Parker, a contributor to Investopedia.com, recommends that you get a property that’s ready as-is or one that you can quickly add a bedroom to. By doing this, you won’t have to rely on a contractor that you might not know or trust in order to have a property that’s ready to be rented. Additionally, you won’t have to put in an unknown amount of money before you’re able to start making a profit from your investment.
To maximize their investment, many people will look for a piece of property that contains multiple units that they can then rent out. But for your first investment property, you might want to keep things a little simpler.
According to Kathy Fettke, a contributor to Fit Small Business, a single-family home is the ideal investment property for first-timers so that you can learn the ropes of having an investment property and being a landlord without all the pressure of multiple units or tenants.
If you’re wanting to purchase an investment property, consider using the tips mentioned above to help you go about this the right way.