There are many reasons why investing in real estate can be a good thing. From the enormous amount of ROI opportunities to enjoying a solid hedge against inflation.
However, if it’s your first time venturing into the real estate industry, you’ll need to know how to finance your first investment.
There are a lot of financing options, and if you play your cards right, you can enjoy solid profits and set yourself up for multiple future investments. Currently, the real estate industry is valued at $3.81 trillion, and by 2030, this number is expected to reach a value north of $5 trillion.
Put a Strategy in Place
Purchasing a rental property can be a great way to invest in the future and start your career as a real estate investor, but it’s important to clearly define your goals for taking the plunge.
Do you want to generate some passive income, or are you simply looking for an investment that could increase in value over time? Whatever your reasons for investing, you need to have a solid strategy in place.
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Get Your Funds in Order
If you’re eagerly searching for a property to invest in, you may want to take a step back and consider getting pre-approved for a mortgage first. By being approved before making an offer, you’ll know exactly how much property you can afford and where to search for the right one.
You might want to do your research and find the best mortgage options. There are a lot of loan types that can help you obtain the property you want without having to pay extreme interest rates each month.
For instance, a 5/1 ARM loan is a great option that could save you money on your monthly payments and enable you to purchase the home of your dreams.
This loan has an interest rate that can change or adjust after an initial period of time. The initial rate is typically set for five years and then can be adjusted annually.
The loan’s interest rates are much lower than regular mortgages in the first five years, and it can be the perfect loan if you don’t plan to keep that property after that mark.
This is especially good for individuals that want to raise the value of the property in that time frame while also receiving passive income.
That being said, when it comes to taking out a loan, having at least 20% of the total amount ready as your down payment is an absolute must. Most lenders will insist upon this requirement before they approve you for any financial assistance.
Do Your Research
When buying a property, it’s essential to do research into what similar properties in the area are selling for. Not only will it give you an idea of the market value, but it can also be beneficial in negotiating down, as you’ll know the upper limit of prices in the region.
You can leverage all the information you gather to prepare negotiation plans and try to obtain the rental property at a fair price and ensure you enjoy maximum ROI.
After you purchase the property, you need to ensure that renters enjoy the perfect experience while on your property. This is why you should consider hiring a property manager if your budget allows you to.
However, you can maximize ROI by taking the responsibilities of property managers yourself. Just be prepared to answer a lot of late-night phone calls and roll the sleeves back to do some repairs.
Don’t Forget Funds for Repairs
Speaking of repairs, prepare for the unexpected by making it a goal to have some money saved away in case something big needs to be fixed. If that’s not possible, there are multiple real estate loan options specifically designed to help property investors raise the value of their homes.
For instance, hard loans are easy to obtain and can help you complete renovations that will raise the value of the property and enable the inhabitants to have a better experience.
In addition to that, investing in a property line of credit can also help you with just that. However, it’s worth mentioning that they might be a bit more difficult to obtain than hard loans.
Bottom Line
By now, you ought to know how to navigate the entire process of purchasing a rental property for the very first time. Everything you might require, from financing tips to the best loan methods, can be found above.
And finally, after you make the purchase, either hire a property manager or prepare yourself for a lot of work because without dedicating time to your renters’ needs, your property will end up uninhabited.
