Buying an investment property is an intelligent financial decision. If you do it right, not only will you be able to earn passive income but you will get tax breaks and enjoy equity gains. That is why you should select the property with care. You will benefit immensely if you make the correct choice.
Here are some of the things you should consider if you are looking to buy investment property in Danville, CA.
Focus on the Location
An investment property should be able to earn you passive income year in and year out. That is why location is important. The location should be dependent on the market you intend to target. For instance, if you want to buy a vacation home, the property should be located in an area that vacationers will find attractive. On the other hand, if you are looking to rent out the property to commercial tenants, it should be located near banks, restaurants, and other amenities that commercial tenants look for.
Check the Down Payment Requirements
The down payment that you need to put down for an investment property is different from what you need to pay when buying a family home. Usually, when you are purchasing a home for yourself, you will be expected to put a down payment ranging from 1% to 10%. However, for an investment property, the down payment requirements vary from 15% to 20%. Furthermore, remember that this property will not be eligible for mortgage insurance and you will have to meet the strict mortgage requirements. Hence, many real estate investors collaborate with realtors in San Ramon, CA. These professionals can guide you and make your life easier if you are serious about buying an investment property.
Focus on the 1% Investment Rule
The 1% investment rule stipulates that each month, the investment property should bring in a minimum of 1% of what you paid for it. Remember, you need to consider not just the price you paid for the property but also the money that you used for repairs, renovation, and other expenses related to the property. That will enable you to set the rental price for the property. That is why location is important. If the property can bring in 1% of the price, it will be an intelligent investment decision.
Understand the Fixed and Variable Expenses You Will Incur
When you buy an investment property, you will have fixed and variable expenses. The rental price should help you meet these expenses. Some of the fixed costs that you will incur will be property taxes, insurance, property management fees, and general upkeep and maintenance. Variable costs are more difficult to predict but make sure you create a budget for them. Things, like repairing a leak, replacing the water heater, or painting are some of the variable costs that you should be ready for.
The Bottom Line
These are some of the main factors that you should consider when you are looking to buy an investment property. Remember to do your research so that you are aware of the best locations to invest in. Working with a reputed and reliable real estate agent will help you get the best commercial property and home prices in Walnut Creek, CA.