While planning to invest in a rental property, the primary goal is to keep a good cash flow while being fully aware of the benefits of owning real estate. Attaining profitability depends on both – income and operating expenses of the property. With the help of a rental property calculator, you can take into account all variables factoring the costings of commercial as well as residential real estate. To gauge the value of a commercial real estate property, using a commercial real estate calculator works in favor of noting down all the avenues of the cost and accurately displaying the actual value of an asset.
Apart from these variables mentioned above involved in assessing the value of your rental property, here are five tips and tricks assisting you in buying your first rental property.
Real estate investment is one of those industries that has given rise to billionaires, such as; Barbara Corcoran. Investing in a rental real estate is a right call, any given day.
- Make sure you are up for the grind: If you plan to make a quick buck, then investing in a rental property is not for you. One the other hand, if you don’t mind getting your sides down and dirty to help to maintain this property of yours, then you can go ahead with this idea. Having a fore-knowledge of the maintenance a rental property involves requires is key to upping your profitability. Unless, of course, you are loaded with cash, that could mean you are well equipped to pay people to maintain your rental property. Which again eats into your profit margin. For a first-time rental property owner, this point is key in keeping a steady cash flow.
- Ensure you have a safety margin by eliminating debt: If you already have a few debts under your belt, then the best course of an action plan for you before getting into the rental real estate industry is to pay off your debts completely. If you foresee too many new loans, such as; your children’s college loans, etc. Then the best course of an action plan is to not invest in the industry. However, if your return on the rental property is far higher than incurring debts shortly, then there is no need to pay off all debt before investing in a rental property.
- Getting ready with the down payment: Those real estate properties used investment for cash flow is generally charged with a higher percentage of down payment. It is usually far higher than the down payment one is subjected to while buying a home. This difference depends on the area of its locality.
- High-Interest Rates: Apart from the higher percentage paid as a down payment, the real estate borrower’s interest rate for rental property is considerably higher than usual residential home properties. Make sure that if you go ahead with the purchase, you exercise extra caution in warding off mortgage interest rates that eat up much of your profit margin.
- Always keep a tab on margins: While going forward with purchasing a rental property, always take into account every cost, making a margin for each of them. You can easily estimate that maintenance work of the property will cost approximately 1% of the value of the property yearly. Apart from that, also note the others cost that will become effective on the purchase, such as; homeowner’s association fees, property taxes, monthly maintenance charges, and insurance charges.
When you are planning to invest in real estate, it is also essential that you use some form of rental property calculator to find out your mortgage interest rate. You can even calculate your commercial real estate value by using a commercial real estate calculator that will help you plan out your line of credit. These are just some key tips and tricks that will help you buy your first rental property. Taking note of these aspects could steer you in the right direction.
