5 Important Factors To Consider When Buying An Investment Property

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An investment property is a residential or commercial property purchased to generate income. Rather than buying a property as your primary residence, an investment property is purchased for the primary purpose of resale or rent. You can invest in a wide range of properties, including townhouses, single-family homes, retail shops,…

An investment property is a residential or commercial property purchased to generate income. Rather than buying a property as your primary residence, an investment property is purchased for the primary purpose of resale or rent. You can invest in a wide range of properties, including townhouses, single-family homes, retail shops, hotels, and restaurants.

Buying an investment property in Essex County can be a smart financial decision. If you do it right, you can get a strong return on your investment, but a big return is not guaranteed. If you are a first-time Essex property buyer, it is normal to feel overwhelmed. To help you with the process of buying your investment property, here are a few important factors you need to consider.

  1. Property Location

Location continues to be the most vital factor to look out for when investing in real estate. When looking for property to invest in, you need to consider proximity to scenic views, green space, and the neighborhood’s status. These are the type of things that attracts potential buyers to your property. It’s advisable to think about the location before the property itself.

  1. The difference in Down Payment

When buying an investment property, the down payment required differs from buying a family home. You can put down as low as 1% – 10% on a family house, but you’ll need to pay up to 20% of the asking price for investment properties. Also, securing financing may be difficult, but it depends on your credit score, income, and debt-to-income ratio.

  1. Purpose of Investment

To avoid unexpected results, you need to be clear on your reason for investing in a property. There are many reasons for buying an investment property. You can purchase a property for self-use, lease, and sell short-term and long-term. Short-term sales are for getting small to medium properties, while long-term sales focus on large value appreciation over a long period.

  1. Fixed and Variable Expenses

Buying an investment property is not a one-day purchase. There’s a lot of money that goes into fixing and maintaining a property after purchase. Many of these expenses cannot be accurately anticipated, but you need to create an appropriate budget. Fixed expenses on the property include property taxes, property management expenses, homeowner’s insurance, and general upkeep costs. You also need to plan for variable expenses like unexpected repair costs.

  1. The 1% Rule

The 1% rule is a real estate term used by an investor to figure out if it is worth making a purchase. It generally implies that you should at least make no less than 1% of the price you paid for a property every month. This payment price involves additional payments like renovations and repairs.

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