5 Tips for Buying Investment Property
Posted by Darren Daltorio | Posted on 12/20/2016
Mike Millea and his dedicated team work hard to help all of our clients make sound real estate decisions in a variety of complicated legal areas including probate, trust, conservatorship, and investment real estate. While any piece of real estate can present a great investment opportunity, investment real estate – defined as a piece of property used by the owner only for tenant rental – can be particularly powerful because it generates rental income from tenants. That said, investment property can be complicated and there are a number of factors that go into deciding whether or not purchasing a piece of investment property is a good decision.
Things to Keep in Mind When Purchasing Investment Property
Investment property can be a great monetary decision, but it’s important to make sure it’s a sound decision before committing. Here are 5 key tips when considering purchasing investment property:
- Location, Location, Location: As with all real estate decisions, the merits of a piece of investment property rely heavily on its location. Take care to research the location of the property, looking at factors like schools, crime rate, local economy, as well as the trends of these numbers over the past year, 5 years, and 10 years.
- Start Small: If this is your first time purchasing investment property, it’s best to start with a lower-cost property. Aiming for a home with a value of about $150,000 is a good target.
- Calculate Monthly Operating Expenses: While investment property may be seen as “passive income,” that doesn’t mean it won’t come with expenses. As a rule of thumb, expect to pay about 50% of your rent income in expenses. Always keep that in mind and balance it against mortgage payments when deciding on a property.
- Look Out for Interest Rates: Right now, interest rates are historically low, but they’re likely to climb soon, and interest rates for investment property are usually higher. Always ensure your mortgage payment won’t eat your monthly profits.
- Get Handy: As a landlord, you’re responsible for fixing sinks, toilets, drywall, and anything else that might go wrong in the property. Sure, you can pay someone to do this, but that can quickly eat up all of your profits. Many landlords do most repairs themselves to avoid sacrificing profits.
Contact Mike Millea For Your Real Estate Needs
While it’s a big decision with a lot of variables, purchasing investment property can be a great financial decision for a variety of people. At the offices of Mike Millea, we’ve been helping countless clients throughout the Torrance, South Bay, & Inglewood areas make sound investment decisions for years. If you’re interested in learning more about investment properties or want to pursue investment property for yourself, feel free to call us at (310) 939-9356 or reach out to us at our contact page. We can’t wait to hear from you!