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According to data, the average rate of return on investment property in the United States is 8.6%. This can make investing in real estate an attractive option for people who want to build value in their portfolio and generate passive income. These tips will help you get started.
- Consider All the Factors Before You Buy
Being a landlord can be more difficult than many people anticipate. For this reason, you may want to hire a property manager rather than manage the property yourself. You also need to consider how much you can realistically charge for rent and compare that amount to what it will cost you to buy, maintain, insure, and rent the home.
You can get an idea of what the market will bear by checking the rental prices of similar properties in the area. You also need to research the types of features renters are looking for. If the property you are considering lacks these features, you may have a more difficult time renting out the property.
- Protect Your Assets
Owning investment property exposes you to risks if a tenant harms someone else, injures themselves on your property, or some other business-related issue results in a lawsuit. Separating your personal assets from your business assets by forming a limited liability company (LLC) ensures that anyone your business owes money to can’t come after your personal assets to settle a debt. To form your LLC in Georgia, you can work with an attorney or use a formation service to avoid expensive legal fees.
- Protect Your Investment
Talk to a commercial insurance agent about the various types of insurance you need to protect your property and your business. Consider whether you want to purchase a home warranty to cover costs, such as replacing broken appliances, that insurance does not cover.
Before you purchase a warranty, review the home’s inspection report for red flags and investigate whether any of the appliances and systems have existing warranty protection. Compare the potential cost savings of using the warranty to cover repairs versus the cost of purchasing the warranty.
- Research the Location
Look for a property that is located in an area where the population is growing. Avoid buying investment property in an area where there is a lot of property for sale. This could indicate that supply exceeds demand, which usually means lower returns.
Research the housing market conditions in areas you are interested in. Communities that are currently undergoing a revitalization plan are often good investments because you may be able to buy while prices are low and earn a high return as the city improvements attract more residents and job opportunities.
- Finance Your Purchase
Getting a loan on a rental property is a similar process to getting a mortgage on a house you plan to live in. However, most lenders charge higher rates and have stricter qualification criteria for loans on rental properties because these loans are riskier.
You will probably need a credit score of at least 620, and you will get better rates and terms if your score is 740 or higher. Expect to need a down payment of 15% to 25%. It is a good idea to save up enough cash to cover three to six months of mortgage payments and other expenses before you buy.
For global clients interested in Atlanta real estate, contact the Puttogo Global Group today!