Buying an Investment Property By Louise Scoggins At Isnare.com Ezine Articles

Buying an investment property is a significant decision that should not be made lightly. However, it is also a potentially profitable endeavor that many people find quite fulfilling.

Before you begin looking at possible properties, be sure and take a close scrutiny of your finances so you can be certain you are ready to embark on this financial venture. Banks are well aware that when things get tight financially, landowners are more likely to default on their investment properties than their personal homes, so they have stricter requirements for getting a loan for an investment property than they do for a personal house. Some important factors to remember are to check comparable leases in the area to get an idea of the amount of rent you can bring in and talk to a variety of mortgage brokers before committing to be sure you’re getting the best deal on a loan. Also essential is the vacancy and tenant turnover cost. Most experts say it’s safe to assume your property will be vacant ten percent of the time. Tenant turnover cost is any replacements, cleaning, painting, et cetera you need to make in between tenants. Any rental will have higher insurance costs than a standard house and you will probably want to have liability insurance as well. Maintenance costs are another factor to consider, although doing the work yourself will save you some money in this category. The size of your property will also factor into maintenance costs. The last aspect you will want to consider is the utility costs and who will pay for what. Will the tenant pay for the power bill or will you?

A rental house or small apartment is universally agreed on as the best choice for a beginning investor. Have an idea of how long you want to own the property. If it’s a longer time, you’ll need to invest in major repairs at some point. If it’s a shorter time, it involves more risk as you can never be certain of what the housing market will do. To be the most profitable, it is best to buy with the possibility in mind of keeping the property for a while. Think twice before buying a property with a lot of major upfront work because you can’t recoup the costs for replacing anything until you sell the property. However, repairs can be deducted from your taxes for the year you complete them.

As with any property, get a thorough inspection before you buy. Some landowners have relationships with contractors to inspect their land and then do any repair work that is needed. Even if you plan to keep the property for several years, unexpected major renovations soon after you purchase the land will spoil all your carefully crunched numbers. An investment property, while a good bit of work, can also be a rewarding and profitable business enterprise. As Calvin Coolidge said, “After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world.”

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