**This article was originally published on March 13, 2020 and was updated on February 22, 2021.
Buying your first Peterson rental property investment can be a delightful experience. However, similar to all investments, expect to face some risks. To be sure that your first investment property purchase in Peterson is as profitable as you expect it will be, there are many things to comprehend before you purchase. By recalling the most significant of these things, you will succeed with your first rental real estate purchase.
Define Your Goals
Maybe one of the necessary things to recall when purchasing your first single-family rental home is to set clearly defined end goals. Before you begin your property search, set aside some time to define the features you want in your investment property. You may be searching for properties in a certain area with a specific number of bedrooms or minimum square footage. By knowing the specifics, you can refine your search criteria and locate potential properties faster.
Prepare Financially
Apart from knowing what you’re looking for in a property, it is important to be financially prepared to purchase an investment property. Industry experts recommend that you pay off your personal debt and begin saving for a down payment before starting your property search. Reduced personal debt can help you get more favorable loan rates since all mortgage loans for an investment property will require a 20% down payment. The pre-financing agreement is another critical step but beware of high-interest loans or mortgage products that seem a little too good to be true. By prequalifying with a reputable mortgage lender, you will be ready to seize the investment opportunities as they arrive. By making financial readiness a priority, you can more confidently buy that rental property when the time comes.
When Should You Lock in A Mortgage Rate?
Locking in your mortgage rate for your first rental property investment can save you money in the long-term if you time it right. When is the best time to “lock-in” your mortgage rate? And for how long should your lock be effective? Unfortunately, there’s not a one-size-fits-all answer to either one. You’ll want to work closely with your loan officer to determine the timing of your rate lock. Most buyers wait until the seller has accepted their offer to lock in their rate with an existing home. With new construction that could take several months to build, deciding when to lock in your rate gets a bit trickier. You’ll want to discuss the matter with your builder and lender before making the decision.
Part of deciding when to lock in a rate depends on how long your lock will be effective. Typically, borrowers have the option of locking in for 30, 45, 60, or in some cases, even 90 days. Locking in a rate for longer periods of time, however, is more costly.
Tips For Your Property Search
Now that you’ve taken these important preliminary steps, the hunt for the right property begins. During your evaluation, one crucial thing to note is that you should run a series of numbers on each prospective property, including your margins, operating expenses, and expected returns. It is where a lot of new investors are making serious errors.
New investors, in some cases, tend to forget to consider all expenses related to purchasing and preparing the rental property for lease, as well as ongoing property management, maintenance, and vacancy costs. Industry experts suggest a margin goal of 10% and a 6% return in your first year means that you have a profitable investment.
Lastly, it should be remembered that an investment property is just that, an investment. Allowing emotions to guide your decisions is certainly not a smart idea. Also, the property you buy is not necessarily a property that you would ever live in yourself. For your first investment, industry experts recommend opting for low-cost properties in high-demand areas. But avoid fixer-uppers unless you’re an expert home remodeling specialist or know a quality contractor who will do the work for less than the going rate. Your first single-family rental property should be considered as the initial move toward a long and profitable investment career instead of the end goal in itself. Right now, you can keep yourself on track and your investment properties in the black.
In case you have found your perfect investment property, make sure you find the ideal Peterson property management team. Contact Real Property Management Northern Utah at 801-546-1770 now.
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