Buying a Rental Property: 3 Mistakes

Published by julia | Filed under Buyer / Seller Tips, Miscellaneous, Real Estate, Shout Outs

Purchasing a property as a rental property is extremely different than purchasing a home for use as a primary or secondary residence. A rental property needs to be purchased with enough financial room to make the purchase beneficial for the investor. The 3 most common mistakes investors make when purchasing a rental home involves the purchase price, the neighborhood and the overall condition of the home.

The purchase price of a piece of investment real estate will be the number one deciding factor in the purchase of the home. Beginning investors usually make their first mistake here. When they research the comp homes in the area, they research based upon mortgage payments. Most often, people rent because it is cheaper than buying a home. The real numbers that need to be researched are the rental payments in the area. When the property goes on the market for rent, it will need to be comparable to other rental prices in a given radius. If the mortgage on the home is higher than the comp rental prices, the home owner might as well live in the home because it will not rent out.

The neighborhood is also important when purchasing a piece of real estate as a rental property. The neighborhood will need to match the style of home purchased. If the investor finds a great deal on a 4 bedroom, 3 bath home with 2000 square feet located on a busy street, things may not be that perfect fit. A 4/3 of that size will be a family home, but living on a busy street is not what a family will want. Neighborhood crime statistics also need to be taken into careful consideration.

When investing in a home for rental purposes, the money used to buy the home should be the only money spent. A fresh coat of paint and a professional cleaning job are at the top end of the renovation budget. If the home is a fixer upper, the investor may find themselves putting more money into the home just to make it livable than they will ever get back out of the home.

Buying property for residential purposes is ideal for the right investor within the right market. But, these three mistakes will need to be avoided like the plague in order to maximize profits and ensure a quick rental turnaround. By avoiding these pitfalls, the investor can sit back and enjoy a steady flow of income from their rental property investment with no worries.