- Buying an investment property is meant to make you money, but you will need to spend money first. Do you have an adequate down payment and are you able to make the monthly mortgage payments if you can’t secure the renters?
- Make sure you have reserves to make the mortgage payment in the event the property has to sit empty for a while.
- If you are buying investment properties that are fixer-uppers in order to flip or to keep, get a qualified inspection before you place an offer and budget correctly for any renovations needed.
- Consider what budget you will need for continual maintenance.
Because real estate is cyclical, property values over the long-term are an unknown. However, history has shown that home prices do increase over time. What returns can you make on an investment house? Time’s Money section suggests that big Wall Street-backed firms that own thousands of rental properties aim for a 5%-7% return on their homes. Individual investors, especially those who don’t have to pay support staff, should shoot for at least 10%,
Keep in mind that you can’t expect to charge enough rent to cover all of your costs – mortgage, property taxes, maintenance – but you can expect to recover some of them, which will help pay off the principal on the home. There are also some tax advantages that you should be aware of:
- Interest, taxes, insurance and other expenses are deductible against the property’s income, while losses can usually be deducted against your other income.
- Depreciation – basically an allowance for wear and tear – is another tax deduction, usually over 27.5 years, or 3.636% of the purchase price of the buildings (not the land) per year.
- Rental properties can be sold, and the proceeds rolled into other rental property without paying capital gains taxes.
Renters are a huge consideration for rental investors. While background checks are available and there is insurance that can cover bad renters, but be prepared for those who don’t pay the rent, destroy or damage the property or cause you other issues. You will need a repairs budget. If your home is a vacation rental, have you researched sharing-economy outlets like AirBnB to lessen the burden?
Buying a home as an investment property could be a good idea if you are prepared.
Investment Properties Network takes a team approach to finding our clients the very best investment opportunities available in the Florida Real Estate market. With offices in Miami and Orlando, we cover the state, thoroughly researching every opportunity we determine is a fit to meet an investor’s criteria. This approach is the key to our success in focusing on international investors, ranging from first-time buyers of residential properties to the experienced investor in commercial and income-producing property. Each client is treated with the same care and attention benefiting from our experience in finding the right real estate investments to suit individual investment needs. Contact us today! Tel: (305) 306-9353, Email: info@InvestmentPropertiesNetwork.com. Visit us online at www.InvestmentPropertiesNetwork.com