Factors To Consider Before Acquiring An Investment Property

property investing, flipping property, finance property

One of the major concerns to potential investors is to ensure they have a sound business idea that makes sense. This business of flipping or letting out property seems to be a tricky concept that only a few understand. The number of clients out there that are looking to buy these properties has diminished substantially over the past couple of months due to several factors including global recession. That does not mean flipping or renting a year or two ago did not make sense neither does it imply it will not make sense perhaps two or more years to come. This calls for knowing exactly how to analyse the current market patterns and predicting the future trends. In order for one to be able to do this, there are a number of factors that every beginner needs to consider.

The Neighbourhood

Overlooking this vital factor can make a negative impact on the success of your property investment plans. Figure out what the neighbourhood is like; is it safe? What about the locals are they friendly? Are the living standards high? Is there any possible expansion of the quality of the neighbourhood in future? When you acquire an investment property within a location which satisfies all of these conditions it will always be given a top priority by tenants whether or not you buy it BMV (below market value) needing renovation.

What Are The Local Vacancy Rates?

Vacancy is among the highest costs a real estate investor can incur. However, it is a normal part of every investor’s life and should be anticipated as well as fully prepared for. You could check with your nearest Realtor to find out the average vacancy rate in the location you intend to acquire a house. Reserve some cash each month for times when the unit is unoccupied so you can continue taking care of other related expenses like legal fees and so on. Also, try to limit vacancies by knowing what the local average market rent is and making a sacrifice to offer just slightly cheaper housing.

property investing, property expenses

Be sure you account for every cost.

Know All Your Investment Expenses

Most first-time investment property buyers err in under estimating their expenses. Even though it is obvious that there are repairs from time to time, investors need also to understand there are many other related costs they may want to account for including; legal fees, evictions, scheduled maintenance, garbage, water/sewer and many more. Unlike other rental property options, a HMO (House in Multiple Occupation) comes with a lot more of these costs.

How Do You Intend to Finance Your Property?

There are various ways to finance an investment property. If you are lucky to have all the cash at hand, you can write a cheque once and for all and not have to deal with banks. However if you don’t have that, you could make just a down payment and secure a mortgage. If you choose a loan, ensure that you understand all the terms and conditions before accepting the money. Know the interest rate on that loan and steer away from adjustable rate mortgages as they may shoot upwards making your payments to go up drastically.

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