What is a reasonable return on your investment? Sure it depends on what part of the country. Would it be fair to get a 6% return on your investment, plus the deductions, including interest?
Many clients come to me to discuss buying an investment property. It is always a concern when they have no experience. I ask them many questions and as a result of my questions, so choose not to invest.
1) Why do you want to buy an investment property?
2) How much money do you have available to put down?
3) Have you thought about how many units?
4) Will you handle the management and renting?
5) How will repairs be handled, can you do them or do you need to hire trades people.
6) Can you afford to carry the debt if an eviction is necessary or there are just vacancies?
7) There are many more import questions, but you get the idea.
Client of mine wanted meet to discuss their interest in buying a multifamily home. A neighbor offered to sell them a 3 family that they owned. They discussed price and wanted to know how much they would need for a down payment and would they qualify. I then started asking them questions and they went from fairly enthusiastic to doing some math and figuring out that the numbers just didn’t work.
They knew the existing rents, what the property taxes were, but not how much the homeowners insurance was, how much the city water and sewer cost was. We did some rough estimates and it was clear the numbers just weren’t going to work.
They couldn’t thank me enough, saying they would have made a bad investment. Make sure if an investment property is in your future, you sit with an experienced Realtor or mortgage broker to make sure you are not making a bad investment.
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