The purchase of an investment property is a great way to make extra income. There are some people who focus solely on investment properties to fuel their bank accounts. There are several things to consider when investing in a rental property.  Here are 7 tips to consider before taking this leap.

Check The Down Payment Requirements

There are different requirements when it comes to a down payment on a rental property.  The minimum required amount is 20-25% down payment.  The down payment must also come from your own resources from either a savings account or existing equity you have in another owned property in your name. 

Get Pre-Approved

It is always best to get pre-approved before doing anything else when beginning the process of purchasing a rental property.  If you skip this step, you could lose your desired property while sitting at the bargaining table.

Do The Math

Its important that you understand the numbers involved in every possible scenario.  This involves calculating your estimated income and operation expenses so you can be sure that you will be making a reasonable profit.  When calculating make sure to include your maintenance costs, property taxes, insurance, utility bills, marketing costs, staging costs, costs to pay staff, mortgage payments and a reasonable allotted amount for repair costs.  You will want to see a reasonable amount of profit to make this move worth it, you may have to do most of the work yourself at the beginning to make this plan work. 

Find The Best Location

A location that is right downtown and close to other desirable locations will always yield a higher profit margin than a house in an area that is based further out of the city.  Safe neighborhoods that are close to transit, shopping, restaurants, jobs, entertainment and schools are important factors for renters looking for a place to call home.  If you’re not clear about the area, talk to a real estate professional who will help you find the best location to purchase an appropriate rental property.

Avoid A Total Fixer Upper

If this is your first time being a landlord, you might not have a lot of extra equity available to fund major renovations.  It can be quite tempting to jump on a low-priced fixer upper only to have the current cost of contractors and reno costs quickly outweigh the benefits.  It will usually be best to find a home that has some minor repairs that prices it well below the market rate.

Have It Inspected

An inspection is an important factor in finding out what kind of major expenses you may face if purchasing a property.  Given that the property is an investment property, you want a building that is in decent condition so that you aren’t having to put forth a significant amount of cash into the property before the renters move in.  An inspection report will tell you all the serious problems and help you decide whether the home is a worthwhile investment. 

Talk To A Professional

There are many things to consider when purchasing a rental property.  Taking on this type of journey without a professional on your side is never advisable.  Talk with your mortgage expert today who will help guide you through this complicated process and make sure you’re making a positive profitable move that supports your future financial goals.