Purchasing investment properties is a great way for generating passive income, but it’s not for everybody. In order to be successful when investing in real estate, you need to ensure that you’re prepared to take the risk involved. With that in mind, real estate industry experts contend that the following 5 signs indicate when a person is ready to purchase investment properties:
Time To Buy Investment Properties? Here Are The Signs
- You’re good at running the numbers – at its core, purchasing investment properties is a mathematical decision. Before exploring the market, investors need to understand the metrics involved. Fortunately, most investment properties such as single-family rentals have a predictable cash flow. The Rule of 72 – dividing 72 by an investment property’s fixed annual return rate – will help you determine how quickly you’ll be able to recover the money you’ve invested.
- You’re prepared to take on more financial responsibility – being a landlord is no small job and requires a huge commitment. Even if you choose the fix-and-flip strategy of property investing, you’re still going to have additional financial responsibilities. These responsibilities often include balancing budgets, managing schedules, and overseeing contractors. Additionally, all properties need care and maintenance while ensuring that there are no gaps between tenants.
- You’ve assembled a support team of professionals – as a property investor, it’s important to put together a reliable support team comprised of lenders, maintenance personnel, real estate professionals, and repair contractors. These professionals can assist you in navigating the purchasing process. When you’re a landlord and something goes wrong at night or on a weekend, you’ll need to have relationships with the right contractors who will handle emergencies and resolve the problem.
- You’ve determined your investment goals – surprisingly, there’s more than just one way to invest in property. Consequently, it’s best to develop an investment strategy before making your purchase. There are different strategies to consider such as buy-and-hold, fix-and-flip, and wholesaling. That being said, it’s important to choose a strategy that suits your financial goals. Ultimately, the strategy you choose will have an effect on the property you decide to purchase.
- You’ve saved up a sufficient amount of money – unlike with a primary residence, you can’t purchase an investment property with little or no money. Since FHA and other government-backed loan programs aren’t usually available for real estate investments, you need to have a sufficient amount of savings built up. Savvy real estate investors suggest having 30% to 35% of the purchase price saved up.
Get In Touch With Your Trusted Mortgage Expert Today
For more information regarding what is involved when financing investment properties, call Granite West Funding at (559) 540-2275 today. Our financial experts are available to take your call and help you with your custom requirements. Call now.