How To Buy An Investment Property Out Of State – Thinking of buying an investment property? Looking for tips on what type of property to buy? Buy something to rent out on AirBnB or focus on long-term rental goals?
In this article, we will answer all your main questions. We’ve been buying and managing our own investment properties for over five years, and we want to share what we’ve learned with you!
How To Buy An Investment Property Out Of State
Investment property is a great way to grow your wealth. Not only can you pay off your mortgage by renting out your property, but you can also claim certain tax benefits.
Royal Lepage Blog
If you have enough cash for a down payment on an investment property, you should seriously consider buying and renting out a property.
Plan to hold your investment property for at least five years and have the financial flexibility to hold it for 10 years in case the real estate market turns south if you want to sell.
First, for those who are buying investment property for the first time, we recommend buying a condo. Why? This is because you will have fewer headaches compared to a property such as a house or townhouse.
In the case of a condominium, your building takes care of building repairs, so you only have to worry about issues with your own unit. Compare that to a home where you have to worry about things like your furnace, AC, landscaping, snowpack, and roof leaks.
Should I Pay Off My Home Or Buy An Investment Property? (ep169)
Second, make sure your property is in an advantageous location – even if it means a little more. This is because it provides great flexibility. If you live in the hustle and bustle of downtown, you can easily rent out our property on AirBnB or manage short-term rentals if you can’t find a long-term tenant. You should look for areas that are close to entertainment districts, universities and major hospitals. Don’t be tempted by the ultra-cheap outlying property values, because you have to work hard to rent them out.
With our property, when we rented it short-term, Airbnb occupancy was over 85%. After moving into a long-term rental, it took no more than seven days to find a new tenant.
Third, do your research on how much it costs to own the property and what kind of rent you can expect from the property you want to buy.
Costs to consider include mortgage (principle and interest), property taxes, condo fees, insurance, and utilities (if covered by the tenant).
Essential Questions To Ask When Buying An Investment Property In Dubai
As for expected rental rates, check your local Kijiji Rentals or other rental sites to see what the market rates are. You can also do a quick search on AirBnB to see market rates for properties in the area you want to buy.
Ideally, you want to be “cash flow positive”. This means that the money coming into your bank account from the rent is more than the money leaving your account to pay for the property.
The rent must at least cover the interest part of the mortgage loan + property tax + insurance + apartment fees. The reason we’re only looking at mortgage interest in this case is that the portion of the mortgage that goes toward paying off the principal isn’t technically an expense because it goes into the property’s equity.
So you have a great investment property in a great location and now you need to let it out. Is it worth renting short term through a platform like AirBnB?
How To Use A Hard Money Loan To Buy An Investment Property
If you have a few hours a week managing your AirBnB property and can clean the property yourself, you will make more money on AirBnB. In addition, short-term rental of the property allows for a larger tax deduction.
If you want to be a more hands-on landlord, one way is to rent the property long-term (12+ months). You’ll probably make 10-20% less than you would on AirBnB, but it’s a lot less work. You only need to deal with tenants when appliances break down or there is an emergency such as a broken pipe.
One of the things that surprises us with long-term renters is how much work goes into finding a good rental. We must conduct a credit check, call references, and spend at least 15 hours before renting our property to potential tenants.
As with any investment, there are certain risks that you should understand before taking the plunge. Some risks can be mitigated with the right insurance, while other risks are completely out of your control. Here are the biggest risks of owning investment properties.
What To Know Before You Buy An Investment Property
1. The market can turn sour at any time. Imagine trying to sell your investment property in 2008, or running Airbnb during the Covid-19 crisis. The market throws us around and you can get stuck if you hold your investment property longer than you want to. Even worse, you can lose money with it. Unfortunately, there is not much we can do to protect ourselves from market forces.
As with any investment, make sure that the money you invest in your investment properties is not money you will need until you retire. This allows temporary swings to run out in market conditions.
2. Your tenants may damage your property. Whether you rent long-term or AirBnB, your property can be damaged by your tenants. The damage can range from a cosmetic annoyance to serious problems that can take weeks to heal.
There are insurance policies that protect you against tenant vandalism, but these policies are often double the cost of insurance that does not cover tenant vandalism. You have to make a judgment call and decide if the peace of mind is worth the money.
Rental Investment Property: Best Real Estate Deals, Where To Buy Now
If you are renting out on a platform like AirBnB, you should still have strong insurance. Claims can take a long time to process under the AirBnB Host Guarantee, and they can essentially do whatever they want as the terms give them unilateral discretion.
If you are letting your property on a long-term lease, a tenant’s deposit (usually equivalent to one month’s rent) can provide some protection.
3. Management of emergencies. Life happens, and sometimes unpleasant problems arise that appear at the wrong time. For example, you could have your lot flooded, or the condo unit above you could have a toilet break and flood your investment property. Being a landlord means you have to deal with these issues when they arise.
We hope this article has given you some insight into whether an investment property is right for you. Feel free to email us or leave a comment if you have any further questions!
Investment Property In Canada
We are not financial advisors and the content on this site should not be construed as financial advice. We make no guarantees if you invest based on the information on this blog. WE DO NOT MAKE ANY WARRANTIES REGARDING THE BLOG AND/OR THE CONTENT, DATA, CONTENT, INFORMATION, PRODUCTS OR SERVICES PROVIDED ON THE BLOG. Avoid Real Estate Five tips for buying your first investment property to generate rental income. Bank!
If you’re reading this, researching and talking about renting, here are some ideas to throw in: ⠀⠀⠀⠀⠀⠀⠀⠀⠀ .
1. Make sure you’re OK as a landlord. If things break, flood, drip or fall, your tenants will call you. Do you handle repairs and maintenance yourself? Or hire a contractor? Be honest with yourself about what it takes—and what it costs—to be a landlord.
2. Be sure to limit the rent. Companies like Airbnb and VRBO are so popular that they’ve passed short-term rental restrictions in many areas. It’s worth keeping this in mind when you’re thinking about where to buy real estate
Top 10 Tips Before Buying An Investment Property From Properties4u
3. Provide a down payment. To buy an investment property, you will need a large down payment. Since PMI isn’t available for rent-to-own, you’ll need at least 20% (most lenders require 25%, but a 15% renovation loan is available for single-family properties – ask for details!).
Interested in local real estate? Sign up for our new newsletter to be the first to hear about open houses, new listings and more.
4. Start with a family home. A single-family rental requires less maintenance than a multi-family or commercial space, and requires less damage to maintain. ⠀
5. Buy with rentable outdoor space if possible. Renters love private outdoor spaces – especially for their pets. A fenced yard, spacious patio or screened-in porch will help your property stand out from the crowd.
Is It A Good Time To Buy Investment Properties?
I love it
How to buy my first investment property, how to buy an investment property, how to finance an investment property, buy an investment property, how to get an investment property loan, how to buy investment property out of state, how to buy an investment property with no money down, how to buy your first investment property, cash-out refinance to buy investment property, best cities to buy an investment property, investment property out of state, i want to buy an investment property