7 tips to keep in mind when buying your first property
Real Estate

7 tips to keep in mind when buying your first property

Many people became rich buying and selling real estate. So investing in real estate is a lucrative business. Unlike buying stocks, you can easily invest millions of dollars in your first purchase. But you have to have the necessary information before you start. Below are some tips to get you started.

1. Repairs

Do you know how to use a toolbox? Can you repair drywall? Can you unclog a toilet? There is no doubt that you can call in a professional to do these jobs, but this will cost you a significant amount of money. Most homeowners, especially those with a few houses, do the repair work themselves to save money. So if you can’t do these projects yourself, you may not want to own them.

2. Debt

Seasoned investors have debt as an important part of their investment portfolio. However, a common man cannot afford to go into debt. Therefore, if he has a student loan to pay off, or has some medical bills to pay, buying a rental property will not be the right decision for you.

3. The initial payment

Typically, if you want to invest in real estate, you should be ready to make a large down payment. Apart from this, investment properties require approval requirements that are more stringent. Therefore, the small sum you put down on your home will not work for your investment property. For this, a minimum of 20% is needed. So, you have to keep this in mind.

4. High interest rates

Now, the cost of getting a loan may not be as high, but the interest rate on your investment property may be a bit higher. Keep in mind that you need to make a mortgage payment that will not be as high. This payment should not be too difficult for you to pay.

5. Calculate your margins

Large companies that buy some distressed properties opt for at least a 5% return on their investment. The reason is that they have a staff to pay salaries. As an individual, we suggest that you aim for a 10% ROI. According to estimates, the cost of maintaining properties is 1% of the value of the property.

6. Buy a house to fix up

You may want to get a house that can be bought at a bargain price to convert into a rental. However, if you are buying for the first time, doing so will be a bad idea. Also, unless you are good at home improvement, the renovation will cost you a lot of money. What you should do is look for a home that is worth less than market value. Also, make sure that the house does not need major repairs.

7. Calculate operating expenses

On average, the operating expenses of a new property are at least 35% of the gross operating income earned from that property. Therefore, you must also calculate your operating expenses.

Hopefully, you are now ready to buy your first home.

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