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Investment Property Buying 101

Happy Couple with Woman Holding KeysIf you’ve been looking for a stable, long-term investment in Baltimore City, residential rental homes might be the investment you’ve been looking for. Regardless, it’s safe to say that investing in an investment property is not equal to buying a residence. First of all, you need to know a few details to make sure that your first investment property is successful. To give you a head start, we’ve listed down the basics of buying an investment property. You can be confident when you buy your first residential rental property when you have this guide to help you through the process.

How It Works

The concept of buying an investment property is a pretty straightforward one: investors purchase a property with the intent to lease it to a tenant. This buy-and-hold model is one of the most common ways that real estate investors start their property portfolios. But, take note, though, that there are key differences in purchasing a primary residence and a rental property.

A typical mistake usually made by first-time investors is to buy a property that they want to live in. This can only lead to a clouding of your judgment because you’re emotionally attached to the property. Instead, investors use a set of calculations and market comparisons to find and evaluate properties to buy. Make sure to keep yourself updated on the fair market value, the fair market rent, and your expected return on investment (ROI). You can compare the different properties in the current rentals so that you can really see which properties are profitable rentals and which ones aren’t.

Another way that buying an investment property is different from buying a primary residence is financing. Financing an investment property will most likely come with a 20% down on mortgage — this is what a lot of investors find challenging. You will need a bit of cash saved up after you make the down payment since there are other costs like the closing costs, repairs, and other rental funds to prepare the property for its first tenant. Hence, starting the financing process early will lead to a better chance of you being able to move quickly when you see a rental property that you want.

What to Look For

It’s important that you know what features people want in a rental property. You should already think about the location, size, amenities, and condition of the property and details about the local rental market. Determine what kind of people are looking for single-family homes, and what they are looking for in a rental home. By researching and talking to rental property experts, real estate agents, and other housing market experts, you can determine the possible renters you might have and what property they are after.

Now, you can start looking for bargains. To help maximize your monthly cash flows and, eventually, your resale value, rental property investors typically look for properties sold below market value. These properties, of course, will be older and in need of renovations and repairs. Don’t forget to take these repairs into account when plotting out your operating budget.

How Long Does It Take?

In buying a property, there isn’t a fixed time. Different investors will take any time between a few months to a year — the process of investing is different for everyone. The average time to close on a mortgage in 2020 was about 60 days; but, that’s just the closing — not including the days spent on searching for the right property. It will always be a case-to-case basis for everyone since there are a variety of factors to consider.

It’s a good idea to avoid rushing the process when it comes to buying your first property. The last thing you want is for you to feel pressured when making an important decision. Each property invested in is a different case; therefore, it takes some time before it can happen. Nonetheless, taking your time will allow you to arrive at a good bargain. This way, you end up very satisfied and happy with your purchase.

If you are in the market for your first investment property, the right people can really help you get the best property. Why not give Real Property Management Prime a call? Our team of Baltimore City property managers helps investors determine fair market rent, perform comprehensive assessments on potential rentals, and even help you locate off-market deals. The more you know going into your first deal, the more confidently you can become a successful rental property owner. Contact us today!

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