One must be comfortable knowing they are liable to pay all the costs associated with the property if they cannot find a tenet.
Chicago, IL (PRWEB) November 16, 2014
Peoples Home Equity, a Midwest based mortgage lender, receives many home loan applications from investors looking to purchase fixer-upper investment properties.
The following are a number of helpful tips to avoid running costly mistakes when searching or purchasing an investment property.
Do The Math – The most common investor mistake is not running the numbers of income versus cost. For a successful cash flow investment, individuals should make sure the potential rental income will be more than enough to cover the costs of the mortgage, taxes, association fees, and utilities.
This should be carried out using a conservative estimate for the potential rental income. Make sure to ask the real estate agent for comparable rental rates of the area or building to obtain a good understanding of the potential rental income of the condo or home.
Account For Vacancy – Knowing the potential rent income is one thing, but accounting for vacancy of the property is another. One must be comfortable knowing they are liable to pay all the costs associated with the property if they cannot find a tenet.
Have The Property Inspected - An investor who finds out that there is visible mold in the wall just before listing their property for rent the day after their purchase is going to be very angry. To avoid any surprises after the fact, make sure the property is fully inspected beforehand, especially when buying a fixer upper home. One must know what needs to get renovated if the home is purchased.
Know The Renovation Costs – TV shows portray buying, renovating and flipping homes as an easy task, but nothing could be farther from the truth. The investors on TV have years of experience renovating homes in various areas based on different state and association rules. Become just as well informed as the professionals and call various contractors for flooring, plumbing, drywall, etc., and ask them specifically how much certain jobs will cost. Make sure to get at least 3 estimates for each job and try to obtain a fixed quote. Doing this before the purchase of a property puts the investor at ease as they have a better idea of the situation they are getting into.
Be Cautious Of Attractive Listings - Properties that require few renovations and are ready to rent are far and few. Investors are attracted to these types of properties because they seem ‘turn-key’ purchase to rent immediately. Be careful, double check there aren’t any caveats with area or association. The property may be on sale because a special assessment will be due for repairs in the building due to a lack of cash reserves with the association. Or perhaps, the property is simply not able to rent-out in the building or for a specified period after the purchase, do the homework and know the rules of area/building.
If interested in purchasing an investment property in some part of the country, consider using Peoples Home Equity as the lender. Contact a Peoples Home Equity loan officer today at: 262-563-4026