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4 Tips for Buying an Investment Property

Buying an investment property continues to be one of America’s favorite ways to invest, especially in places like Las Vegas. An investment property should be about increasing your wealth and securing your financial future.  There is however, a common misconception that property investing always delivers positive returns. While this is true most of the time, it certainly isn’t an instant road to riches. Keep in mind that how effectively you manage your investment will determine whether or not the investment helps you reach your financial goals.  The cost of owning an investment property can be surprisingly low after you take into account your rental income and the tax deductions you’ll be entitled to.

Here are four tips for first time investors.

1) Choosing the Right Property at the Right Price

Investing in real estate is usually all about capital growth, so choosing a property that is more likely to increase in value is the most important decision you will make, so buying at the right price is absolutely critical. If you’re not familiar with the location where you’re interested in purchasing, find a trustworthy real estate agent in the area who specializes in investment properties. They can help you find the steals that are currently on the market. They are there, you just have to know how to find them.

Whatever you do, never make a decision to buy an investment property based on getting a tax deduction – always focus on making the right investment choice.

2) Remember That Cash Flow is ALWAYS King!

Investing in property is a proven path to long-term wealth. However, you should consider it a medium to longer term type of investment, so you’ll want to make sure that you can afford to maintain your mortgage payments over the long term. You do not want to have to sell your investment property until you are good and ready, and if you were to encounter some financial stress this could force you to offload the property at the wrong time.

Once you own an investment property it can be quite inexpensive to keep it and service the loan because you earn rent and get a tax deduction on many of the expenses associated with owning the property. Remember that over time rents tend to increase as does your own income – so expect things to get easier over time.

3) Pick the Right Type of Mortgage for You

There are many options when it comes to financing your investment property, so get sound advice in this area as it can make a big difference to your financial well-being. It is surprising how many people spend too much time researching mortgages in an attempt to save a few dollars a month, rather than spending that time on researching their local real estate market where much bigger gains can be had.

Interest on an investment property loan is generally tax deductible, but some borrowing costs are not immediately deductible and knowing the difference can count. Structuring your loan correctly is critical and this should be done with the help of a trusted financial advisor.

Whether you choose a fixed rate loan or a variable rate loan will depend on your circumstances, but consider both options carefully before you decide. Over time variable rates have proven to be cheaper, but selecting a fixed rate loan at the right time can really pay off. Remember that rate usually rise in line with property prices, so increasing interest rates are not always bad news for property investors as they have more than likely had a win on the capital gains front.

4) Check the Age & Condition of the Property

Needing to replace the roof or hot water service in the first few months of ownership could make significant difference to your profits and really damage your cash flow.  It is therefore advisable to engage a professional building inspector before you purchase (and then once a year) to conduct a thorough property inspection to find any potential problems. It’s not always a bad thing to buy a property that is not in peak condition, because you get the opportunity to improve the value of the property by fixing the place up and this can increase your returns. Now you can’t do that when you buy stock!

If you’re looking for investment properties in the Las Vegas area, contact us today. We’re experts here in the Valley and can help you find the right property for your needs!

 

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