3 Proven Tactics to Turn a Profit on Your First Investment Property

    Throughout history, investing in real estate has been nearly universally recognized as a time-tested strategy for building and maintaining wealth. Even the language historically used to refer to property investors — mogul, tycoon, magnate — conjures images of a luxurious life filled with leisure and passive income.

    Most real estate investors, however, don’t become wealthy overnight. Real property investing has a shockingly high failure rate, and not everyone has what it takes to be a landlord. More importantly, not everyone understands how to turn a profit as a landlord. If you’re ready to try your hand at the world of investment properties, these three time- tested tactics will help you generate a profit on your very first property.

1. Choose a Property With Profit Potential

    When it comes to generating profits, selecting the right property makes all the difference. The most successful real estate investors are those who are experts at analyzing the profitability of various properties. Always take the time to do due diligence before purchasing an investment home.

    Just as with all real estate purchases, location is key. Ideally, choose a neighborhood where around 30-35% of the homes are rented and the other 65-70% are owned. Use the internet to do market research and get a feel for home prices in a particular area. Aim for somewhere in the middle of the price range. It can often be difficult to find tenants for high-end homes, while low-end properties tend to have high tenant turnover — a known profit killer.

    Once you’ve narrowed in on a neighborhood, work with a realtor who can help you search based on your criteria. Never select a “fixer-upper” or “handyman special.” Always try to buy investment properties for at least 10-20% below market price.

2. Act Wisely at the Financing Table

    Many property investors fail because of financing mistakes: They fail to either start with enough investment capital, or set aside enough funds for expenses, or secure good financing terms.

    Start by figuring out how much you can afford to spend. Don’t buy an unprofitable house just because it’s all you can afford; instead, wait a few more months and save up enough for a house that will generate profits. Most first-time investors will need to secure a loan, and to do so, expect to pay at least a 20% down payment.

    Many mortgage programs that allow smaller down payments require that you live in the home as your primary residence for a certain number of years, so conventional mortgages are often the best option for investment homes.

    Compare mortgage rates, and check with a lender to find out what you’ll need to qualify. Among the benefits of a conventional loan are avoiding mandatory mortgage insurance, and choosing between a fixed or adjustable interest rate. For a better idea of what you can expect, PennyMac current rates are updated daily.

3. Invest in an Experienced Property Manager

    First-time landlords often attempt to handle property management themselves to save on expenses, but this isn’t a smart choice. Experience is key to managing rental properties and tenant issues effectively, so an experienced property manager or management company is worth every penny. A good property manager can assist with getting the property rental-ready, marketing the house, finding a tenant, handling paperwork and deposits, and taking care of tenant issues.

    Investing in real estate is still a great way to make a fortune; however, it’s also an easy way to lose one. These proven tactics will help make your first foray into property investment a success. Start the process by reaching out to Realty Navigator today. 443-600-1986

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The Author: Katie Conroy is the creator of Advice Mine. She enjoys writing about lifestyle topics and created the website to share advice she has learned through experience, education and research.

   Realty Navigator is a full-service, independently owned, and operated real estate brokerage with offices in Annapolis and Chester, MD. We provide customized real estate listing services, residential homes, and land for sale from Brandywine, Prince George's County, to Kent Island and in Talbot, Caroline, Queen Anne's County. Trusted and experienced agents are standing by to discuss your real estate transaction. Call or click today at 443-256-3773 or 410-643-3404. If you need to speak to the Broker, Petra Quinn, call 443-600-1986.