Buying an investment property can be a great source of income. But property can also be a money pit if not considered wisely. Our Director of Acquisitions, Kate Homme, both oversees Patriot Family Homes’ property portfolio growth while also being a personal property investor. Kate offers her five must-know tips for first-time investment buyers.
1. Determine your goals.
Before you start browsing real estate listings, ask yourself: Why am I doing this? Are you looking for passive income? Do you want a vacation home? Both? An honest investigation of your motivations for buying another home will
help you narrow down the perfect property for you.
For example, if your goal is passive income, you’ll want to prioritize properties with the best Return on Investment, but don’t necessarily have all the features and style that you personally like in a home. If you want a vacation home that you’ll spend two weeks at with family and friends every summer, then home features and style will matter to you.
2. Shop around for lenders.
If you qualify with one lender, you will qualify with others. Not all lenders have the same fees and some can offer a more competitive interest rate. Compare rate sheets and ask lenders to match what another has offered. They want your business!
3. Draw a hard budget line.
How much you are approved for does not equal how big you can go on the purchase. Set a firm budget for yourself by asking: what monthly payment will work best for me in any investment scenario? Take into account mortgage, interest rate, insurance, taxes, and utilities if you are planning to buy an investment property you intend to turn into a Short-Term Rental (STR).
4. Be aware of flood zones and other geographic factors.
Flood zones will add a lot of cost to your insurance. For coastal properties, take wind/hail insurance into account. For West Coast investors, fire and earthquake insurance also adds up.
5. Find a customer-savvy, investment-minded realtor.
Not all realtors are experts in investment property deals. Buying an investment property merits a whole different set of factors and considerations than buying a forever home. Partnering with a savvy realtor can mean the difference between closing on a good investment and a great investment.
If you are buying an investment property that you intend to rent out to short-term renters (like on Airbnb, VRBO, etc.), find a realtor that is intimately familiar with the mind of the short-term guest. What does a guest really care about when booking a house? Not the school zone. But a great screened-in porch or luxury walk-in shower may be the feature that sells them on booking your house.
For more information on partnering with Patriot Family Homes to manage your investment property, please email Barb Purdy at barb@patriotfamilyhomes.com.
Learn more about Patriot Family Homes property management services here.
