Buying rental property is one good way of diversifying your investments. This type of investment, however, requires some preparation on your part, especially with the changing market.
Here are some tips to help you proceed.
Location, Location, Location
The location is the topmost consideration when investing in rental properties. It has to be somewhere where people would actually want to stay for a considerable amount of time. It can be a rental for vacation purposes, or it can be somewhere near the city where non-locals can rent for work reasons.
Ask yourself what kind of tenant you will be getting with the property.
Pay Off Your Debts First
While it is definitely tempting to buy a rental property for additional income, investing in rentals are often more expensive than buying property for your own use. To start, the down payment cost is definitely bigger, not to mention the ongoing rates. Hence, it makes sense to wipe off the outstanding debts first.
Start Low Cost but no Fixer Uppers
Unless you have a background in fixing up old homes, it is generally not a good idea for first-time property owners to buy a cheap house and build it up to standards. You might be surprised at how much this adds up in the end.
Instead, purchase something you can use immediately, but does not cost too much. Experts suggest a home that is less than $150,000 for your first investment.
Consider Ongoing Expenses
Lastly, consider how much the item you can rent it out for, taking into account similar properties within the area. Now, compare this with how much you would be spending to maintain the property and ultimately, how long before you get a return on your investment.
Buying real property for rental purposes is definitely a good way of preparing for the future, but you should do this carefully, so you do not compromise your present finances.