Real estate can be a very good investment. You can make money on rent while you own the home, and then earn even more when you sell the home down the road. However, this is not a foolproof plan, and your success depends on making smart decisions from day one. If you are preparing to buy your first investment property, here are a few helpful tips that will boost your chances of success.
1. Avoid flipping unless you really know what you're doing
There are two main ways to make money on real estate. You can buy rental properties, or you can buy a house, rehab it, and quickly sell it again. This second approach is called flipping, and it can be quite profitable, but it is also quite risky. There are so many things that could go wrong that could result in you losing your investment. Leave flipping for the more experienced investors (which could be you in a few years), and for now, just look for a rental property. There's much less risk with rental properties.
2. Make sure you can cover your costs with rent
First-time investors often assume that it's okay if the rent they bring in does not quite cover the expenses of the mortgage and taxes, since they'll earn that money back when they sell. But think of if this way: you can only afford so many homes that cost you money to own each month. On the contrary, you can afford to buy an infinite number of homes that bring in net income each month. Don't buy a rental home unless you are certain the rent you collect can more than pay the monthly expenses.
3. Work with a real estate agent who specializes in rental properties
Some real estate agents are excellent at buying and selling family homes, but they don't have as much experience with rentals. Others are excellent with rentals and make it their specialty. You want to work with this second type of real estate agent. They'll be more familiar with the value of homes that are in neighborhoods where renting is common. They'll also know what features will be appealing to your future renters and which will be a turnoff, which will enable them to better help you choose a home.
Buying your first investment property is a big move, but with the tips above, you can make it a smart move. For more information, contact a local real estate agent.