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Investment Property Considerations
Location first, property second.
Investment property down payment is on average a minimum of 15 – 20%. Your down payment is based on your credit score, income, and debt-to-income ratio.
1% Rule – In a real estate investment, your monthly rental income should be equal to 1% of your initial investment plus your improvement costs. i.e. your investment plus improvements = $300,000. Your monthly rental income should be $3,000.
Expenses – Investment property incurs regular and some unexpected expenses. Fixed expenses are insurance, taxes, and property management fees. Variable expenses are generally unexpected repair costs.
Property Management – If your time is limited and have no experience managing tenants, property management may be worth the additional expense.
Investment property risks
Having to pay upfront for expensive repairs
Increase in property taxes
Economy changes
Bad tenants resulting in expensive repair and eviction costs.
Tip: Be sure to have some wiggle room with your finances so you can deal with unexpected expenses.