1. Select the right house in the right location.
The first step in learning how to buy an investment property is location, location, location! An ideal investment property is one that requires mostly cosmetic corrections in an area that has shown a steady increase in property values. Locations that have lots of nearby employment opportunities tend to hold their value better, meaning you’ll have higher profits. As a matter of convenience, if the property needs work, buying something close to home will make it much easier to work on.
2. Decide what work you’ll do and what you’ll outsource.
Take some time to assess your experience level and willingness when it comes to home repairs. Do you love home improvement projects? Are you good with power tools? Part of knowing how to buy an investment property is knowing your own skillset. If you’re able to do the work yourself, you’ll save a lot of money on repairs, but it will require more of your time. Alternatively, if you intend to hire the pros to get your fix and flip finished, you’ll want to account for the added cost of labor when you’re determining your ROI.
3. Determine your Return on Investment (ROI).
Investopedia suggests that individuals look for properties that will give them a 10% return on investment. To calculate your ROI, you’ll first want to figure out your property’s net annual income. You can do this by adding up all of the expected costs (taxes, insurance, repairs, known vacancies, utilities) and subtracting it from the rent money you expect to receive. Once you know your net income, divide it by the purchase price of the property. For example, if your annual income is $11,000 for a property you purchased for $100,000, then your ROI would be 11%.
4. Secure financing.
Depending on the type of lender you work with, this step could either be complicated or simple. With traditional lenders, you’ll need to provide W2s, credit history, employment history, and bank statements just to apply for the loan. Or you can skip the red tape and work with Brass Financial Group on your next investment property. We’ve got highly competitive terms and we’ve been helping families follow their dreams for the last 25 years.
Now that you know how to buy an investment property, call our office at 609-800-FUND and see how we can help you.