Having a little extra money available is never a bad thing. But when you can take that money and grow it, it is even better. One of the best and most effective ways to grow that income into a steady stream is through an investment property.
But if you are totally new to the game, there are a few things that you should be aware of when investing in your first property.
Do You Want to Be a Landlord?
While that income stream may seem great on the surface, there is a lot more to being a landlord than collecting a check. Can you make the necessary repairs? If not, are you willing to spend to bring in a property manager? There are a lot of responsibilities that a landlord faces. Know them and be willing to handle them before you get started.
Pay Off Personal Debt
Before you can get started with an investment property, it is imperative that you not carry too much personal debt. Whether that be in the form of unpaid medical bills, student loans, or having children who will soon start college, it can be detrimental to purchasing investment property. Part of what it takes to invest in a property means having all of your ducks in a row first.
Much like a down payment is essential to buying a home, it is so for buying an investment property. Further, you will need a larger down payment to get the job done. You typically need at least 20% down for a property since mortgage insurance is not available on rental properties.
Even if the physical property checks off all of your boxes, the location will be the most important aspect. After all, attracting tenants is a balancing act. The property has to be attractive enough that it brings in tenants or it is a wasted investment. Look into school districts, access to local amenities, crime rate, and property taxes, among other things.