3 Things to Consider When Buying Your First Investment Property
It’s time to purchase your first investment property.
Buying your first property can be both terrifying and exciting.
Becoming a landlord is a long-term investment that not everyone is ready for.
Any property you purchase will require a great amount of research, and it will require you to ask a lot of questions when it comes to what you are looking for.
We’ve seen our fair share of complicated purchases, and we’ve seen a lot of great investments.
So, we want to help you with a few key details you’ll need to be aware of before making your big purchase.
Everyone is different when it comes to what they want to see in their first property.
Is there a specific price range you want to stay in?
Are you wanting to purchase a single family or multi-family property?
Below are three questions you’ll need to answer in order to improve your search.
Along with the details that pertain to your expectations and goals, there are also general details that are important for every investor to be aware of.
1. What Are You Looking For In The Location Of The Property?
When finding location to start your property search, you should take a look at the following:
Property Tax: Property tax is based on a tax assessment that is done by a government assessor. They will assess how much your property value is an calculate the amount of tax due on it.
The total will vary depending on which county and state your property is in, so if you are looking in a few different areas this number will be important to write down. You’ll want to lower property tax that won’t affect your investment goals.
Good School District: It’s important to see your rental property in the eyes of a tenant. When you are searching for a home, is a school district with a higher rapport going to be on your list of needs? The answer is more than likely, yes.
Looking up the school district grading system is fairly easy to find. Sites like Niche usually provide a very informative piece of data to help you find the best areas to choose from.
Job & Population Growth: Careers are going to be another deciding factor for Tenants when it comes to where they rent. Is there a high unemployment rate in the location you are looking at? If yes, then you might want to look elsewhere for your investment property.
Population growth will typically go hand in hand with job growth, so there aren’t any renovations, new businesses planned, or growing neighborhoods, then it’s time to look in a new location.
Crime Rate: Crime is going to unfortunately be a part of every neighborhood, but its’ still important to see how high or low the rate is. Using tools like BestPlaces can help you easily find these scores.
On a scale of 1-100 with 1 being the least amount of crime, the national average score for property crime is 35.4 and violent crime is 22.7. You’ll want to look for an area that has preferably less than or around the same as the average score.
Amenities: Most people prefer to be close to everything when it comes to renting. Having access to public transportation, being close to restaurants, and only being a few minutes from other amenities like parks can be a huge benefit for your investment.
HOA: The Homeowner’s Association is something that is often overlooked when it comes to purchasing a property.
The HOA can cause headaches for investors and often get a bad reputation due to the restrictions and regulations some of them have for rental properties.
2. Are You Managing Your Property Or Are You Hiring A Property Manager?
If you are planning on self-managing the property, it might be important that the property is within close proximity to you.
This doesn’t mean that you need to be neighbors with your Tenants, but it does require you to consider how far you are willing to travel if and when you need to visit the property.
For instance, if you don’t want to drive more than 30 minutes, you’ll have a 30 minute radius of locations you can choose from.
On the other hand, if you are planning on hiring a property management company, then you will want to ensure that the company you choose manages properties in your desired location.
3. What Are Other Rental Properties Like In The Area?
When it comes to numbers, calculate what you will need to charge for rent based on the desired price range you want to pay for your property.
Then, check locations to see if the average rent is within the number you will need to charge. Smaller cities might have rent that is lower than you expected, so you may want to search for properties in larger cities where the charge for rent is higher.
Choosing what kind of property you want is going to be key for figuring out your budget.
There are different options you can choose from when it comes to the types of properties you can purchase.
Keep in mind your rental property doesn’t need to provide high-end appliances and luxuries, but if you are unsure of what your home should have, look into other rental homes in the area. Seeing what your competitors are providing can give you a better idea of what you may want included in your home.
After your research, ask yourself:
- Do you want a single family home or a multi-family home?
- If you want a single family home, are you looking for a condo, townhome, or a house?
- If you want a multi-family home, are you looking for a duplex, fourplex, etc.?
Once you choose which type of home you are looking for, it’s time to get into the details of what you want that home to provide.
- Total square footage
- Number of bedrooms
- Number of bathrooms
- Number of floor levels
- Outdoor space (deck, yard, pool, garage, etc.)
- Appliances (laundry, microwave, ice maker, etc.)
- Home amenities (fireplace, storage space, etc.)
Finding your first investment property isn’t going to be an easy task. It’s going to take a lot of research and time. However, if you put that time in now, it will benefit you more in the long run.
Thankfully, there are companies that can help you with this process and walk you through everything you need to look for.
If you are interested in finding a property in Central Indiana for you first investment, our brokerage team would be more than happy to meet with you.