400 Creekside Drive, Suite 407-409 Pottstown, PA 19464

Investment Property Do's and Don'ts: Must-Have Tips for Buying Investment Property

Monday, May 10, 2021

Over ten million Americans report income from rental properties each year. If this is something you're considering, then property investment may be for you. 

If you're trying to expand your investment property strategy, you may be wondering where to begin. This is especially true if you're starting in the world of property investment for the first time.

You're in luck. Read on for our do's and don'ts when it comes to investing in property.

Do: Organize Your Money

Before start investing, you'll need to decide whether to finance the new property or buy it outright.

Consider mortgage costs as well. You'll need at least 15% of the total property cost for a down payment.

Make sure that you have all the financing in place before you invest. And, make sure that your new investment property won't cause any problems for your financial stability. If investing may hurt any of your other investments or your personal financial health, it's best to hold off until your state of affairs is a little stronger.

Do: Consider Your Options

There are a lot of different types of investment properties out there, and you may be lost trying to choose the perfect type for your needs.

You can look into apartment buildings or multifamily dwellings if you plan to purchase in an area where a lot of different people need housing. If there are a lot of businesses opening in your area, look into commercial rental properties so that you can take advantage of the business boom.

If you want something a little lower maintenance, you can look into investing in vacation properties, which may only need upkeep for part of the year.

You'll also want to consider where you want to purchase your property, and in what area. It's usually simplest to buy property in the same city or region you currently live in, especially when you're first starting out. That way, you're more likely to be properly informed about your legal obligations when purchasing property.

The neighborhood you choose is also important when buying property. You don't want to just buy property in a cheap neighborhood, in the hopes that the neighborhood will suddenly gentrify. Ask around, and look for neighborhoods that are currently on their way up.

Public transit accessibility can be one sign that a neighborhood may be a good place to invest. If you find a property near a notable landmark, such as a university or the business district, that's another indicator that this could be a good property for you to invest in.

Do: Pick The Right Insurance 

You should also ensure that you choose the right insurance policy for your investment needs.

When choosing a title insurance policy, you'll have to decide between a standard and enhanced insurance policy. A standard insurance policy can protect you from basic issues, like fraud, duress, or forgery in the title chain, liens on a title, and unproperly signed documents.

However, an enhanced title insurance policy can protect you from things like permit violations, unrecorded easements, discriminatory covenants, lack of vehicular and pedestrian access, and so much more.

Making sure you have adequate coverage is necessary to make sure that you are protected, both financially and legally. 

Don't: Leap Before You Look

Before you invest in a property, it's important to consider all aspects. You can start by calculating the estimated return on investment that a given property offers. Some of the factors you'll need to consider when figuring out your ROI include the following:

  • Broker fees
  • Estimated rental income
  • Operating income
  • Insurance fees
  • Property taxes
  • Maintenance fees
  • Cleaning fees
  • Homeowners Association fees

You can talk to professionals if you're not quite sure if your potential investment property meets the mark when it comes to the potential return on investment.

Don't: Neglect Your Property Management

Once you buy an investment property, your responsibilities don't end there. You'll need to make sure that your property remains in tip-top shape, and that you have a management team in place. That's true whether your investment property is a commercial or residential property.

Your property will need to be properly cleaned and maintained, particularly if it's a property that will have significant turnover. You can hire a property management company if you'd like to go the easy route. Just make sure you research the company before you hire them, and check that they have the proper licenses and good reviews from other clients.

Don't: Get Surprised by Your Investment

With any financial investment, there are likely to be delays and financial problems. Maybe something in the property will have to be repaired, or there will be unexpected fees.

Make sure you put a cushion into your budget for investing, so you won't end up underwater on the property. Always prepare for the worst case scenario when investing in real estate.

Don't: Slack Off Legally

When purchasing any rental property, you need to know what your legal obligations are. These responsibilities can differ based on the type of property that you plan to invest in. They will also differ depending on what state you are in.

For example, in Pennsylvania, you'll be responsible for housing and Environmental Protection Agency regulations, tenant rights, having the proper property management licenses, and so much more.

And, be sure to have your new investment property thoroughly inspected before you put your money down. This will help you avoid nasty legal surprises, such as lead paint or other dangers.

Start Your Investment Property Journey Today

Hopefully, you're now well on your way to starting your investment property empire. Get your plan together, and get started.

Do you need more help when it comes to insurance and real estate? Contact us today for all the information you need.

View All Recent Posts