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investment property

6 Signs You’re Ready to Buy an Investment Property

Nowadays, investing in real estate to gain passive income piques the interest of many. And how would it not! With today’s competitive market and constantly rising prices, investors’ gain is indefinite. However, if you want to set yourself up for financial success, you have to make sure you’re ready to bite the bullet. You have to remember that buying an investment property is so much more than just having enough money to do it. You have to have proper knowledge about real estate, current market trends, and predictions for that market in the future. Only when you’re armed with both knowledge and money will you be able to do this investing the right way. Therefore, let’s talk about the six signs you’re ready to buy an investment property! You have clear investment goals There are several ways to invest in real estate: fix-and-flip, buy-and-hold, and wholesale. Therefore, investors should have a clear investment plan in mind before making a purchase. This means you need to do your research and pick the investment strategy that suits your budget and financial goals. So, let’s elaborate a little on the possibilities you have. A “fix-and-flip” method is purchasing a house, renovating it, and immediately selling it for a profit. A “buy-and-hold” approach would entail keeping the property in your portfolio for the long term and renting it out. In wholesaling, you would sign a contract with sellers to assist them in finding a buyer for their property. Finally, the investment plan you adopt will impact the type of investment property you intend to buy. This is why it’s critical to define your financial goals before you buy an investment property. You have equity  Homeowners can frequently leverage the equity in their primary property to acquire a loan or even cover the deposit. This implies you may not have to worry about a downpayment as you did for your primary home. Let’s elaborate, shall we? Suppose we know that the equity represents the value of your property minus the amount you own for it. In that case, we can easily find out how much of the equity we’ll be able to deposit towards the investment property. So, if your house is worth $700,000, for example, and you still have to pay $400,000, this means your equity is $300,000. When deciding whether to provide you access to your equity, your bank will consider several variables, including any other loans you may have, your age, income, and the number of children you may or may not have. If you’re approved, you will typically be able to borrow up to 80% of the value of your primary property, minus what you still owe. Therefore, using the preceding example, you will be able to deposit up to $160,000 of your entire equity towards an investment property you want to buy. Since you are effectively using your present property as security for your investment property, this can be risky. This implies that both houses will be on the line if things go wrong. Therefore, before making any decisions, make sure you are informed of the consequences and risks and thoroughly examine your alternatives with a professional. You have savings  Sadly, unlike with a primary house, there is no such thing as purchasing an investment property with little or no money down. This is because government-backed loan programs (such as FHA) aren’t often accessible for investment properties. Therefore, you’ll need to have some money saved up in your bank if you want to buy an investment property. In fact, experts recommend saving 30 to 35 percent of your anticipated buying price. Most banks need a 20% down payment and up to three months of spending in savings. You should also have enough money left for repairs to prepare the properties for occupancy. Whether you like it or not, lenders consider the number of liquid assets you’ll have after making your down payment and closing costs. They do this to ensure that you’ll be able to make your mortgage payments even if something unforeseen occurs to your regular salary. While lenders want their borrowers to have a particular number of months’ worth of reserves following each transaction, the criteria for investors are frequently harsher. Therefore, you need to be armed with serious money before buying anything. You know how to do the real estate math  Buying an investment property should be a mathematical calculation at its foundation. Therefore, before entering the market, prospective investors should get to know and understand the metrics they’ll need. Fortunately, there are many rules of thumb investors can rely on during the process of buying an investment property. So, here are some of the facts nobody will tell you about that will help you predict your profits: 50% of a single-family home’s total rental revenue is spent on running expenditures such as taxes, vacancy, insurance, turnover, and maintenance. You can get the time it takes to recuperate your investment if you divide 72 by a predetermined yearly rate of return. If you can rent out your home for 1% of the purchase price, you can meet your mortgage payments with the proceeds. You’re ready for extra responsibility  While equity is one of the best pros of investing in a rental property (or buy-and-hold investment property), added responsibility is definitely a big con of this type of investment. Being a landlord requires a significant time commitment. If you’re prepared to screen eligible renters and cope with the maintenance of your rental property, you’re ready to buy it. If not, then you should invest in something else. Of course, you can always contact a reliable property manager, but that doesn’t mean you don’t have to deal with your investment property. After all, it’s your property, not theirs.  Furthermore, even if your objective is to fix and flip a house, you’ll have additional duties. Your tasks will include budgeting, supervising contractors, and managing schedules in such a situation. However, in any case, it’s critical to realize that the passive income that comes with purchasing an investment property is accompanied by additional work. Therefore, before proceeding with your purchase, ensure that you are prepared to take on that work. You found a team of reliable professionals  As an investor, you must have a solid team that includes real estate, finance, maintenance, repair contractors, and property managers. In addition, you’ll need a team of experts to help you through the purchasing process. Buying an investment property is no joke. Therefore you need to secure yourself the best experts in town! As you start to put together your team, you’ll have to do your homework. Proper research will do the job. Thus, read online reviews, ask family and friends, meet three or more professionals in person, etc. Once you have gathered all the information you need, it’s time to hire all these experts! Conclusion Yes, if you want to buy an investment property, you’ll have to invest more than just your money. You’ll have to gain profound knowledge about real estate and finances, as well as invest your time and prepare for a lot of extra work. You need to understand one thing: buying an investment property isn’t the same as buying a primary home. The bank will treat you completely differently. Therefore, prepare for expensive costs and fewer benefits to make a passive income that can set you up for life. Photo: https://www.pexels.com/photo/a-person-holding-a-key-8292791/ Article Courtesy Of: Betty …

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3 Signs You’re Ready To Buy An Investment Property

Investment Property Definition An investment property is real estate purchased to generate income (i.e., earn a return on the investment) through rental income or appreciation. Investment properties are typically purchased by a single investor or a pair or group of investors together.  3 Signs You’re Ready To Buy An Investment Property First, know that the buying process is different for an investment property compared to a primary home. Before you invest in property, make sure you meet the following qualifications. 1. You’re Financially Stable Investment properties require a much higher financial stability level than primary homes, especially if you plan to rent the home to tenants. Most mortgage lenders require borrowers to have at least a 15% down payment for investment properties, which is usually not required when you buy your first home. In addition to a higher down payment, investment property owners who move tenants in must also have their homes cleared by inspectors in many states. Make sure you have enough money in your budget to cover the initial home purchase costs (like your down payment, inspection and closing costs) as well as ongoing maintenance and repairs. As a landlord or rental property owner, you must complete essential repairs in a timely manner, which can mean expensive emergency plumbing and HVAC repairs. Some states allow tenants to withhold their rent payments if you don’t fix broken home utilities on time. Make sure you budget more money than you think you need for regular and emergency home repairs. Investment property expenses don’t just begin when tenants move in. You also need to budget money for advertising and credit checks to make sure you take in the best tenants possible. A great set of tenants are an asset for your property, while bad tenants can increase your expenses dramatically. 2. The Return On Investment (ROI) Is There Real estate investors often see positive cash flow with their investment properties in today’s market, but the savviest investors calculate their approximate return on investment (ROI) rates before they purchase a property. To calculate your ROI on potential property investments, follow these steps.  Estimate your annual rental income. Search for similar properties that are currently up for rent. Find an average monthly rent for the type of property that you’re interested in and multiply that rent price by 12 for a year’s worth of income.  Calculate your net operating income. After you estimate your annual potential rental income, calculate your net operating income. Your net operating income is equal to your annual rental estimate minus your annual operating expenses. Your operating expenses are the total amount of money that it takes to maintain your property every year. Some expenses include insurance, property taxes, maintenance and homeowners association Do not include your mortgage or interest in your net operating expense calculation. Subtract your operating expenses from your annual rent estimation to find your net operating income.  Find your ROI. Next, divide your net operating income by the total value of your mortgage to find your total return on investment (ROI). For example, let’s say you buy a property worth $200,000 that you can rent out for $1,000 a month. Your total potential income is $1,000 × 12 months for a total of $12,000. Let’s also assume that the property costs about $500 a month in maintenance fees and taxes. $500 × 12 = estimated operating expenses of $6,000. Subtract your operating expenses from your total rent potential: $12,000 − $6,000 = $6,000 of net operating income. Divide your net operating income by the total value of your mortgage: $6,000 ÷ $200,000 = 0.03, which makes this property’s ROI 3%. If you buy a property in a solid area and you know that you can rent to reliable tenants, a 3% ROI is great. However, if the property is in an area known for short-term tenants, a 3% ROI may not be worth your time and effort. 3. You Have Time To Manage It Investment property management still takes a lot of time. You have to put up advertisements for your space, interview potential tenants, run background checks on tenants, make sure that tenants pay their rent on time, perform maintenance on your property and make timely repairs if something in the home breaks down. You also must do all of this while working around your tenant’s “right to privacy,” a legal standard that prevents you from dropping by unannounced without at least 24 hours of warning in most states. Before you decide to buy an investment property, make sure you have plenty of time to maintain and monitor your space.  Take the first step toward buying a house. Get preapproved to see what you qualify for.Start My Preapproval Things To Consider Before Buying An Investment Property Time, down payments and returns are just a few pieces of the investment property puzzle. Here are some other considerations to think about before you invest. What Are The Housing Market Trends? You want to choose a property that rises in value over time. But how can you tell which areas will become the next best places to invest in real estate? The only way is to watch an area’s housing market indicators and rental trends over time and compare the direction of previous property prices and taxes to where they are now. A home purchase is a major investment, so don’t be afraid to take plenty of time to do your research and to analyze market trends to find the perfect area before you dive into a loan. Should You Buy With A Partner? A partner might seem like a great idea – you can pool your money, split maintenance costs and requirements and combine your home repair skills to save money on professional contracting costs. However, buying with a partner also splits your potential profits in half and puts you in the position of sharing legal liability with another person. For example, if your tenants tell your partner about a pest problem and your partner doesn’t fix the issue in a timely manner, your tenants may sue both of you because you are both landlords and you are both equally responsible for providing a habitable environment. You should also remember that if something goes wrong with your partner and you split the cost of the home equally, you’re both equally legal owners of a single property. Make sure that the person you choose is trustworthy, responsible and proactive when it comes to maintenance if you decide to go in on a rental property with someone else. How Much Will Property Taxes Be? Property taxes are taxes that homeowners pay to support their community and local government. Property taxes fund fire departments, public schools, libraries and other local projects. The amount you pay in property taxes is directly related to the value of your home. If your home is worth more money, you pay more, and vice versa. Local governments set their own property tax rates, so the specific amount you pay in property taxes depends on your house’s location. Speak with a local real estate agent or mortgage lender to calculate how much a certain house will require in property taxes. No estimate is going to be perfect because every homeowner qualifies for different levels of exemption as well. Should You Hire A Property Management Company? You need to decide whether you want to handle property repairs, tenant management and maintenance yourself or if you’ll hire a property management company to manage the daily maintenance on your behalf. Property management companies take both scheduled and emergency repair calls and check up on your property with both drive-bys and scheduled visits to make sure that tenants respect your space. They can also collect rent on your behalf. Some property management companies also offer tenant placement services and eviction processing for an additional fee. In exchange, the property management company takes a percentage of your monthly rent. If you live far away from your property or you don’t have the home repair skills to fix your own property, hiring a property management company may be a great choice. Applying For Investment Property Loans: How To Prepare Mortgages and loans for investment properties – such as a non-owner-occupied mortgage – work a little differently than those for personal homes. Investment Property Loan Requirements If you have a mortgage for your primary residence, you probably know that most mortgage lenders no longer require a 20% down payment to get a loan. Lenders are stingier with loans for investment properties, however, because the risks of foreclosure and default are higher. Most fixed-rate mortgages require at least a 15% down payment with a 680 qualifying credit score for a one-unit investment property. Your credit score should be at or above 620 if you’re applying through Rocket Mortgage®. Lenders want you to put down 25% with a 620 or higher interest rate on two- to four-unit investment properties. Pre-Approval It’s a good idea to get preapproved for a mortgage before you start searching for homes so you know how much home you can afford. You can apply online with Rocket Mortgage to get a preapproval. A preapproval is different from a prequalification. A prequalification only tells you how much money you might be eligible for – it’s not as strong. A preapproval requires your financial information so the mortgage company can provide a solution that’s customized for you. While prequalification only looks at your credit and your inputted estimate for income and assets, preapproval involves a hard credit pull and proof of income and assets. …

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How to get started buying investment property

You likely know investing in real estate can be one of the best ways to achieve financial success. However, it is no secret that buying rental properties can be a big step. Fortunately, with the help of True Property Management, you can get started with your first investment property to put you on the path to a more lucrative future. 1. Start With Thorough Research Real estate is all about location. In Southern California, it may seem like anywhere can be profitable. However, in such a competitive market, every investor needs to carefully balance affordability and desirability. Doing plenty of research helps you make more informed decisions about which properties to purchase. 2. Secure Essential Financing Of course, most people don’t have cash lying around to buy investment properties. This is okay. With appropriate financing, you can ensure your property earns a good return on investment without needing to have the capital upfront. In fact, according to Apartments.com, you can even buy investment properties in a number of ways with little or no money. Take some time to research your financing options. Often, the mortgage is the biggest ongoing cost associated with an investment property. Saving yourself even a small amount each month can be worth the work. 3. Obtain the Right Help With the Purchase Process Working with real estate experts can help secure a better deal. Someone who is familiar with residential properties in California can assist you with opportunities you may otherwise miss. Additionally, they can give you some insider knowledge on whether a deal is as good as it looks. Like any other business function, buying real estate is often easiest when you have the right professional services in your corner. A realtor is a big part of this. However, you should also have a good accountant and potentially even a financial consultant. 4. Be Realistic About Your Management Abilities Investment properties aren’t just a matter of purchasing a building and collecting rent, even if your notices are on your best invoice template. Properties need to be managed. Be realistic about how much time you can commit to managing your property. If you are buying a duplex and renting out one unit, it is reasonable to maintain a full-time job while also managing your property. If, however, you are buying a multi unit apartment building, managing all the units may be a full-time job itself. It is often a good idea to acquire some help for managing properties. You can consider hiring someone directly. Alternatively, you may prefer working with a property management company. 5. Make Sure Your Property Is Competitive Finally, you need to think about how competitive your property is with other rentals nearby. For example, dated interiors could set your property back. Similarly, you want to repair any items such as appliances that could present safety issues or address other major aesthetic drawbacks. Hiring a repair service can be a little tricky. However, it is worth the time to research reviews to find the right option and possible discounts. You will also likely need repairs in the future, so building a relationship with the right service provider is a good idea. Get Ready to Buy Your First Property By following the above tips, you can be in a good position to buy an investment property. This could become a lucrative path if you play your cards right. This article is brought to you by True Property Management, which currently manages properties all across Orange County, California. From the beaches of Newport and Huntington Beach to Costa Mesa, Irvine, Orange, Santa Ana, Tustin, Mission Viejo, and everywhere in between. Our tremendous success is the direct result of landlords like you leaving their current management for someone they can trust like True Property Management. Virtually all of our clients were once with another management company. We know and understand your pain because we interview each of our landlords to better understand their needs and make it our mission to best serve you. For more information, please visit our website or contact us …

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Predicting Profits From Your Investment Property

An investment is a risk; there’s no guarantee of profit. Some investments are riskier than others. For better or worse, profits from your investment property are one of the more difficult ones to predict. While predicting the market is incredibly difficult, there are a few things you can do to manage better and predict profits from your investment property. 3 actions you can take to manage better and secure profits from your investment property Research Your Neighborhood Even if two neighborhoods are right next to each other, it’s important to know that each neighborhood has its own real estate market – its own values, its own turnover rates, its own desirability. If you’re looking to invest in property in your current neighborhood, you might be at a slight advantage for predicting the real estate market. At the very least, you should have at least general understanding of the market you’re looking to invest in. Make sure you take the time to calculate rent prices, use neighborhood search tools, analyze property reports, visit online listing sites, and talk to a local real estate agent. Know Your Property Knowing your neighborhood is important, but knowing as much as you can about your investment property maybe even more so. Knowing as much as possible about your property makes it easier to calculate rent prices that will maximize your earning potential.  Rental properties in different neighborhoods will command different rent rates, even if the units are the same size. Take your amenities into consideration, along with property updates. The more amenities a property has and the more remodeled it is, the more you can charge for rent.  Estimate Potential Earnings Finally, once you have as much information as possible about your property, you can start estimating your potential earnings. Calculate rent prices at current market rent and figure out how much your rental property would be able to bring you in a given month. Don’t forget to subtract expenses, like maintenance and taxes. You’ll also want to account for times when your property may be vacant between tenants. Estimated earnings can also help you understand if updating the property is worth the cost. Knowing just how much you can earn through your rental property can be complicated. These three steps can help you start. For more information on real estate investment; or to see what your rental may be worth with a rental rate calculator, contact True Property Management today – 866-957-6677. Source: …

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Can You Use a VA Loan for Investment Property?

VA loans offer veterans a convenient way into the property market. As they’re backed by the Department of Veteran Affairs, applicants can get away with no credit score minimum and no money down. But what about investment properties? Are you able to use a VA loan for investment property or multi-unit homes?  Short answer — The VA loan program is designed to assist veterans, and military members find a home they will use as their primary residence. As such, you cannot use the program to shop for an investment property, meaning one you intend to repair and flip immediately or one you plan to rent out wholly. However, that does not mean you cannot earn money from a VA-financed property entirely. To use a VA loan for an investment property, you will need to fulfill the following three requirements: 1. You’ll need to have military service To even consider a VA loan, property investors must make sure they meet the program’s military service requirements. Meaning, you (or your spouse if you’re co-buying) must be an active military member or veteran. You also should have clocked a specific number of days within the military, counting on once you served. The requirements are pretty specific based on whether your service was during wartime or peacetime, so check the charts at VA.gov to make sure you’re eligible before going further. If you ultimately find yourself applying for a VA home loan, you’ll have a Certificate of Eligibility from the Department of Veterans Affairs. 2. You have to live on the property Have you ever heard of a strategy called house hacking? That’s what you’ll need to do in order to use a VA loan for an investment property. One of the more important VA loan requirements is that the borrower uses the house as their primary residence. Meaning, if you propose to use the program to buy a multifamily property, you will need to live in one of the units. You’ll also have to move into it within 60 days of closing on your loan. 3. Your property cannot have more than four single-family units VA loans can only be used on properties with up to four units. If you go above this, your rental property won’t qualify for financing. Meaning duplexes, triplexes, and quadplexes are all fair game. But big apartment complexes? Definitely not. Using rental income to qualify for a VA home loan If you and your property meet these requirements and plan to rent out some units for extra money, you might use that income to help you qualify for the loan. To do this, you’ll need to have cash reserves to cover at least six months of mortgage payments and documented experience as a landlord. Meet both those qualifications, and you can collect 75% of rents previously collected on the property or 75% of the rent an appraiser projects you can ask for each unit. Article Courtesy Of: Gabriel Merchen, …

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