Three things you need to know before you buy your first investment property.
- You need to understand that the interest rate that you're getting for this type of loan, an income property loan is going to be slightly higher than it would be if you were getting a home that you will actually live in. So, understand that because it could make or break your numbers. When you're doing your analysis.
- Make sure you're looking at a location that's actually desirable to rent in because after all the rent is what you care about. My suggestion would be finding an area that is near freeways, that's near jobs, near a hospital, near schools. That way you have a safety net. You're still going to have an area where people want to be. So, make sure that you're really paying attention to that location.
- You want to pay close attention to the utilities. For example, if there's only one water meter, that means that everyone is sharing the same water meter. That means that the tenants cannot pay for their own water bill, and you know, who pays for that? You. That means your utility bill is going to be higher, which means that you're not going to be cash flowing as much because you're going to have more operating expenses.
These are little nuanced tips that you really need to pay attention to when you're crunching the numbers.
A bonus tip, if you're looking for an income property, you want to find a sleeper property, a property where the realtor is either posting proforma rents, which are projected rents, not the real rents or worse. They're not posting the rents at all. They're literally saying that there's zero rental income. Well, that probably means that they have a long-term tenant in there. Someone who's not paying market rents. And that means that people are overlooking these properties. And when a property has been sitting on the market for a long time, I smell opportunity.
I highly recommend that you do a rental survey, find out what these places can rent for. Crunch your numbers. I know this is a lot to digest, but I hope you found it helpful.
If you want some one-on-one coaching on how to find an income property or if you have any questions, let’s talk.
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