Buying your first investment property is a big decision, which needs a lot of research and financial planning. As a first-time investor, the buying process can quickly become stressful as you are investing a significant amount of capital in the venture. However, once you start understanding how the rental business works, which property you should invest in, and how to find the right tenants, your real estate journey can become much smoother.
Here are some tips to help you deal with first-time investment jitters and gain clarity on how to purchase a property in Roanoke stress-free.
1. Set Clear Investment Goals
Setting clear and smart goals is important for succeeding in any business. Your success in real estate investment boils down to your ability to set realistic financial goals and clearly defining the returns you expect from this investment. Here’s what you must identify to set clear goals:
Identify the purpose of your investment
Be clear about your purpose of buying a property before you start looking for one. Evaluate whether you want to buy a rental for long-term tenants, or short-term vacation renters, whether you are in it for the long haul or plan to sell it in the future. If you do not have a clear motive for your purchase and keep changing your mind when you see different units, you are likely to end up losing precious time and money.
Ask Yourself If You Are Ready to Be a Landlord
Becoming a landlord requires you to carry out various responsibilities such as finding and screening tenants, attending to frequent maintenance issues, and being prepared to deal with unforeseen expenses, among other things. You need to be sure that you are ready to take up this responsibility so that you are mentally prepared to handle the day-to-day stress of property management.
2. Choose the Property Type that Meets your Requirements/Goals
Once you are sure of the purpose of the investment, the next step is to choose a suitable property. There are several different types of properties in Roanoke.
These include single-family homes, multi-family units, apartments, condominiums, vacation homes, duplexes, quadruplexes, villas, and townhouses.
These consist of office buildings, malls, shopping complexes, grocery stores, individual shops, and industrial buildings.
Think through your investment needs and priorities before deciding which property to choose. For instance, if you wish to start off gradually, investing in a conventional property that is relatively easy to maintain and for which you can find reliable tenants, you can choose to invest in a residential single-family unit.
If you have the financial capability and a strong risk-taking appetite, you can consider investing in a commercial property. Either way, talk to a professional property manager to figure out what are your expectations from the property and decide the type of property accordingly.
3. Thoroughly Research Roanoke Real Estate Market Trends
Avoid making hasty, uninformed decisions. Trust data over your gut feelings. Local real estate trends change frequently and you need to stay informed to improve your current and future investments. Do thorough market research using dependable resources and take the guidance of experienced Roanoke property managers who can help you identify and learn about local real estate patterns. The Roanoke market trends depend upon:
- Quality of life
- Price changes and affordability
- Trends in the job market
- Interest rates
- Government policies
4. Calculate Your Risks Before Buying Your First Investment Property
You need to be smart and extra careful as this is your first time buying an asset. Analyze the drawbacks or the potential risks that come with purchasing any property.
Some of the potential risks of investing in real estate can be:
You might select an excellent home, but if the location is not desirable enough, it probably won’t get rented soon. In such situations, you may need to lower your rent and end up reducing your ROI.
A vacant house earns you no money, but you are still accountable for paying the mortgage and bearing the maintenance costs. As a result, rental vacancies are a potential risk when you invest in real estate. Whether it is a single-family home or a vacation rental, vacancies are a possibility you have to factor into your annual budget, or even while determining the type of property you are buying in Roanoke.
Bad tenants are a liability and despite having a stringent screening process, you cannot entirely eliminate the risk of having them. Bad tenants, who fail to pay the rent or don’t use the house responsibly, may cause extensive damage to the property and make you spend a lot on repairs. This is a perennial risk, but with the help of a professional property manager, you can significantly reduce your chances of leasing your property to a bad tenant.
These are risks associated with real estate investment and can cause a lot of stress while buying a property. However, they can be curbed with the help of experience and guidance from professionals.
5. Evaluate Your Asset-Related Costs in Advance
Since you’re looking forward to buying a property for the returns, fixed and recurring costs are something that you should evaluate. Here are some of the factors which you will necessarily have to take into account to reduce last-minute stress while purchasing the property.
Costs Involved in Buying a Property
There are substantial costs involved in buying a property such as:
- the down payment
- legal fees
- mortgage costs
- land taxes
- building inspection costs
Costs Involved in Renting the Property
There are several additional costs that you will have to cover when you rent out the property, such as:
- Property taxes
- Homeowner’s insurance
- Maintenance and repairs
- Utility fees
- HOA fees, if applicable
- Marketing fees
- Vacancy turnover
- Lease creation and lease renewals
- Property manager fees
Being aware of these costs at the beginning helps you be prepared with the necessary funds and none of these comes as a surprise.
6. Plan Your Finances Before Buying Your First Roanoke Rental Property
Buying a property requires substantial capital investment upfront. You need to invest money without knowing if the investment will yield returns the way you expect, and it might be some time before your property starts yielding a steady cash flow. As a new investor, this period between investing your money and getting returns can be pretty stressful, unless you plan your finances properly. Here’s how you can plan your finances to reduce the stress of buying your first Roanoke home:
Apply for a Suitable Mortgage
If you choose a mortgage that doesn’t suit your investment goals, the payments can be overwhelming and extremely stressful. Hence, consider which mortgage is suitable and compatible with your current savings, expected cash flow, and the value of the property. There are six main types of mortgages that you can consider. These are:
- Conventional Mortgage
- Conforming Mortgage Loan
- Non-Confirming Mortgage Loan
- Government-Insured Federal Housing Administration Loan (FHA Loan)
- Government-Insured Veterans Affairs Loan (VA Loan)
- Government-Insured U.S. Department of Agriculture Loan (USDA Loan)
7. Keep a Record of Your Daily Expenses
There are some simple ways of managing your finances in a disciplined manner that can help you save substantial money at the end of the year. This includes keeping a detailed record of every penny that you spend, creating a budget, and setting goals to save a certain weekly or monthly amount.
8. Check the Property Condition
Before moving ahead with the buying process, make sure that you have examined the condition of the property thoroughly. You don’t want to discover any structural problems or damaged items after you pay for your first asset. If you find any damages and foresee any immediate expenses in renovation, you can negotiate a lower price at the closing table.
9. Hire a Property Manager
Understanding the minute details of the real estate market, doing the research to stay updated with the market trends, and selecting a property that suits your financial condition can be a challenging task, especially if you are doing it on your own, for the first time.
There are higher chances of making an accidental error and while you can eventually learn from these mistakes, they may end up costing you thousands of dollars, plus time, and energy.
Hiring a property manager can greatly reduce your stress of buying a Roanoke property as they are experienced professionals who can handle all the relevant legal and management-related tasks with ease and guide you through the process as well, so that you are aware of everything that you need to know. A local Roanoke property management company, like Lawson Realty Group, has extensive knowledge about the Roanoke housing and real estate market and can make your journey easy and hassle-free.
Lawson Realty Group has been in the real estate business for over 40 years and we understand exactly how big a decision your first-time investment is for you. Our experienced property managers can assist you in navigating your Roanoke property-buying process seamlessly, eliminating all unnecessary stress, to ensure that your investment experience is nothing short of wonderful.
For more information on how we make life easier for first-time investors, contact us at Lawson Realty Group.