Yes, its always a good time to purchase investment property. The problem is over the past ten years, people were purchasing investment properties like cars. Just because you qualify doesn’t mean you can afford it. A car is a depreciated item; a house is an appreciated asset and all assets must be protected. If you are considering purchasing an investment property whether cash or acquiring a loan there are five imperative things you MUST have in place.
1. Reserves - If you have a mortgage, you should have a minimum of 3 months of mortgage payments on reserve plus repair expenses and utilities.
2. Plan – before you purchase have a plan in place. (Renting/rehab/owner financing/lease purchase/hold) What are you going to do with the property? Old rule “If you fail to plan, you plan to fail”
3. Do the math - Will more money be going out then coming in? Make sure you crunch all the numbers and expenses. If an investment property doesn’t cash flow, then it’s not a good investment; it’s a liability.
4. Location – make sure you purchase in a good location. What is a good location? Well, a good location is where people want to live. If your purchasing in the suburbs, make sure the property is located near a good school district. Most families’ first priority is the school district. Secondly, if your buying in the city find a property located within close proximity to your cities central business district, cafes and restaurants, retail shops, and all the good stuff your city has to offer. The main reason people live in the city is for convenience.
5.Management - If you plan to rent, have a management company in place especially if you have more than one property. Most owners try to work a full-time job and landlord properties as well; IT DOESN’T WORK. In order to be an effective landlord, hire professionals to assist you with your property. The last thing you want is to be in court with your tenant on a workday using vacation time. LESS HEADACHES!
If you follow these five golden rules, then you're on the right track to getting a good return on your investment. YOU MUST DO YOUR DUE DILIGENCE!! A bad investment can really affect your credit and/or your liquid.
Good article Christina. All potential property owners should also understand the importance of an inspection report and some of the key items that should afford a high level attention in their analysis because what may look good on the outside, may not be so good once one acquires the property. Like you mentioned previously, due diligence will go a long way in determining the potential of the property.
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