3 factors you have to consider when shopping for an investment property

Buying a rental property can be a wise investment if you know what you are doing. But you have to plan and consider all the implications of your decision. Otherwise, you may find yourself tied down to a property that costs you more money than it brings in and weighs down your credit. Meeting with your PRMI loan advisor to see what mortgage financing you qualify for to buy an investment property is a great first step before you begin looking for a property.

Once you have an idea of what you can afford, then it’s time to start looking. House hunting when looking for an investment property isn’t the same as when you bought your home. This time, you’re looking for different things, and you have to consider the profitability of each property you view. So, what exactly are you looking for? Here are some suggestions to help you as you begin your property value search.

• Property value: The property value of an investment property is a little different than the value of your home. For example, when buying a home, you want to buy in an area with good property value or one that is expected to rise. This way, your home will increase in value. For an investment property, you can consider a lower-valued property with more rentability. Buying in an area with lower property values may mean the property is cheaper, too!
• Average rental costs: Another factor to consider when buying an investment property is the average rental costs of the area. You need to know what other rentals are going for to stay within the market average. If you want to charge more than the average, you have to be willing to offer amenities that would make people pay a higher amount of rent.
• Additional property costs: A rental property is only profitable if your expenses are less than how much you are charging. That means the rent you charge needs to cover not only the monthly mortgage payment but additional costs like home maintenance, landlord insurance, property taxes, and more. If you want your rental property to be a successful income stream, you need to have a clear idea of what these expenses will add up to and make sure you can charge enough to cover them.

Owning a rental property is a great way to use real estate as a passive source of income. But you must be willing to do your homework and buy the right property at the right price. Our team at PRMI can help you get the right mortgage financing in place if you plan to buy an investment property. Reach out to your local PRMI loan advisor today to schedule a consultation.