After finally saving up enough money to use as a down payment, I decided that it was time to hit the market. I met with a lender, got pre-approved for a loan, and then started visiting different properties. However, I quickly realized that I didn't know as much about real estate as I would have hoped. I wanted to find a great neighborhood and know what to ask the professionals, but I could tell that I needed a little help. To point me in the right direction, I started working with a great real estate agent who was familiar with the area. This blog is all about educating the general public on real estate matters.
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Buying a home for your residence is a big decision, but so is buying a rental property. Here are some important guidelines that can help you to stay within your budget but still get a home that fits your wants and needs. Here are some tips to help you find a home that will make a good rental property based on its physical properties as well as its financial benefits to you as the landlord and owner.
Calculate Rental Rates
When you are searching for a property that will make a great rental, you will need to have a cash flow that covers its expenses. Because the property's cash flow comes from the rent, you will need to calculate the rental rates in the property's area to make sure you can fairly charge rent to cover the property's expenses. You don't want to charge rent that is higher than other homes in the area because no one will rent your property.
Research your area to determine how much homes can be rented for. This includes duplexes and other multi-unit homes because you might find that a multi-unit property can bring in a positive cash flow easier than a single-family property.
Another thing to consider is maintenance costs. For example, a duplex will only have one yard and its exterior that needs upkeep. In contrast, two single-family homes will each have their own yard care costs and exterior costs, which could potentially double your costs.
Arrange for Financing
Along with calculating market rental rates, you will need to find out how much your property financing is going to cost. This will be based in part on the interest rate and loan terms you can get. As you calculate a property's potential cash flow, you need to know how much the mortgage payment will take from your rent income to determine if the property has a potential for profit.
For example, if you can qualify for a low-interest rate on a property, then the debt would be lower versus if you can only get financing at a higher interest rate. A higher cost on your mortgage will affect your cash flow slightly but enough that it can make the difference in a positive or negative way.
To learn more about buying a new home, contact a home finder near you. They will help you find new homes for sale in your area.
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