You’re looking for a way to make some extra money and have an idea for how: Buying an investment house. Owning a property that you either renovate and sell or rent out to tenants is a great way to build some extra capital and make money. Here is a step by step guide for buying an investment house in Metro Detroit Michigan.
Know Your Goal
Are you looking to make a little extra money so you can take a few vacations a year? Do you want investment real estate to be your sole source of income? Are you looking to retire early? Answering these questions will help you better plan your strategy for your investment properties and give you a direction when buying an investment house for the first time.
Get Advice
Owning an investment property is a lot of work, and there’s a lot that can go wrong. Talk to others who own similar types of investment properties as you, asking questions about what they wish they knew when they first started, some obstacles they could have avoided, and their best tips for success. Many people are more than willing to share their knowledge with others looking to break into the investment property scene.
Save for the Down Payment
Just as you want to be sure to save for a down payment on the home you live in before you buy, you need to make sure to save for a down payment when buying an investment house. Most experts recommend saving at least 20 to 30 percent of the sale price before you start looking.
Anticipate Other Expenses
The cost of owning an investment property goes beyond just the sale price of the property itself.
In your budget and plans, be sure you include line items for:
- Property taxes
- Anticipated and unexpected repairs, especially if you plan to rent the property to others
- A rainy day fund to help cover the mortgage or other expenses in leaner times
- Costs of marketing your property to potential renters or buyers
Get Pre-Qualified
Walking into a home showing with a pre-qualification letter in hand can make buying an investment house much easier. Remember: If you already carry a mortgage on the home where you live, you may have to have more cash on hand in order to qualify for a loan to buy an investment property.
Choose a Market
If you plan to purchase your property in a market in another area, be sure you thoroughly research the area. You don’t want to purchase a property that will need high monthly rent in an area where average rents are very low, for example.
Some things you want to check in any markets you’re considering include:
- Job growth in the area
- Population growth in the area
- Average monthly rents
- Schools
- Crime rates
- Access to public transportation, parks, libraries, restaurants, and other amenities
- Average household income
- The walkability of the area
Select a Property
Whenever possible, visit all potential rental properties in person. It’s very easy for photos and video tours to hide some of the flaws of a property, and that home that looked great on your computer screen may not be so spectacular once you’re inside. also, don’t just jump in and buy the first property you tour that’s listed for a good price. Take some time to look at your other options before putting in an offer. Have a list of backup options ready, too. Offers get turned down and sales fall through all the time and going back to the drawing board each time just delays your timeline.