Things to Consider Before Buying an Investment Property in Encinitas

Buying an investment property can be a great way to secure your financial future, but it is also requires a huge investment of time and money. Before you decide to invest in your first property, you should take a number of things into account.

Are you Ready to Invest?

Making a real estate investment is a big decision, and may not be for everyone. Making sure that you have your personal finances under control is the most important thing when you begin looking into buying a rental property. This is a process that can span years, and even decades, so it’s crucial to have secure finances.

Once you are confident in your finances, do as much research as possible. Books, blogs, websites, and forums are excellent resources to take advantage of. You can also work closely with an experienced realtor like myself to familiarize yourself with the market and find the best properties to invest in.

Choosing the Right Property

Now that you’re ready to invest, you need to choose the right property. You need to ask yourself exactly what you’re looking to get out of your investment, and the amount of time and effort you wish to put in. Are you looking for something that you can “flip” quickly to make a profit, or would you prefer a more stable, long-term investment? There are many different options available to you when investing in properties, so choose the one that fits your lifestyle and goals.

Foxnews.com offers some tips about what kind of properties you should buy:

  • Well-maintained homes – The time, effort and money required to bring fixer-uppers into good condition make it difficult to get a good ROI on them.
  • Avoid fancy, expensive homes – The higher the home price, the lower the net rental income is compared to it.
  • Buy as personal residences, change to rentals – Owner-occupants get the best financing, and living in the house gives you insight into what needs to be improved before you sell it.

Are you Considering All Your Expenses?

A mistake many people make with their first investment property is underestimating what their expenses will be. Commonly overlooked expenses include utilities and garbage removal, legal fees, evictions, scheduled maintenance, and capital improvements.

One thing to consider is the “50% Rule” which states that over time, property expenses will equal 50% of the income. In other words, if a property rents for $2000 a month, you should account for $1000 in expenses before you pay the mortgage.

Have an Exit Strategy

Before jumping into your first investment property, have a desired end-game in mind. Know what you want to get out of your investment, and stick to your plan. However, you should also make alternative plans in case you need to change your approach. Knowing what exit strategies are available to you, and being able to account for possible changes in your investment, will help you have a greater chance at a return on your investment.

By Linda Moore

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