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Investor’s Guide

If you’re thinking about investing in real estate, you might soon discover that there’s plenty of information to take in. Investing in real estate can be difficult if you’re not prepared, as there are a lot of requirements as well as legal and financial aspects involved. To be successful, you will need an in-depth understanding of the process and what you should expect before you buy your first investment property.

Here are some valuable tips to keep in mind when investing in real estate:

Property Values

You need to be aware of the values in your area in order to know whether a particular deal on a property is good or bad. Getting general property value estimates will not be enough if you want the best results. You need access to both listing prices and closed sale prices, so you can see how each one varies, as only closing prices are the ones that will give you a better picture of the market.

Down Payment

Plan a minimum down payment of 20% of the property’s purchase price, as applying for a zero down mortgage program isn’t possible with investment properties. Although there might be mortgage programs which advertise lower down payments, there’s a slim chance you’ll be able to qualify for them.

Prepare a Vacancy Allowance

If you’re planning on investing in real estate, it’s a smart idea to be ready for months when you might not receive any rental income. This typically happens when you’re in between tenants (there are also situations wherein your tenant needs to relocate all of a sudden). You need to prepare enough cash in the event of an unexpected stop to your rental cash flow.

Have a Budget for Repairs

In addition to having a vacancy allowance, will also need to set aside a budget for additional repairs whenever there’s a change in tenants. You can use the budget for something simple like items for general housecleaning or something major like a kitchen overhaul or a complete paint job.

Background Checks

It’s always better to put yourself in a situation wherein you can prevent problems rather than dealing with them as they happen. One of the best ways you can do this is by performing thorough background checks on potential tenants, including criminal background checks and credit checks. You can also request cancelled rent checks for the past year or two on their previous rental situation.

Earning Income from Your Property

In order to generate a stable monthly income from an investment property, you will need to acquire it at a low enough price so that the rental fees will cover the basic house payment. This will depend entirely on the market you’re looking to invest in, as you can easily find more affordable properties in places with low property values, while it can be difficult in those with high property values.

Looking for the perfect investment property in sought-after communities within Middlesex, Monmouth, and Union Counties? Talk to us at Formula Realty! You can call us anytime at (732) 858-5822 or send us an email at mybrokermax(at)gmail(dotted)com.