Buying An Investment Property: What You Need To Know

Are you considering investing in real estate, but aren’t sure what all that may entail? Buying an investment property is an excellent way to diversify your investment holdings while minimizing risk. Learn how to leverage your money to invest wisely.

Are you considering investing in real estate, but aren’t sure what that may entail? Buying an investment property is an excellent way to diversify your investment holdings while minimizing risk. And the best news for potential real estate investors is that it’s an opportunity that’s not just restricted to people in the highest income brackets. With a decent amount of money to invest and good credit to secure any necessary loans, you can begin your real estate investment journey in fairly short order.

Risk? What Risk?

All investments carry risk. But compared to the risks posed by, say, stock investing, securing your money in an investment property is reasonably safe. After all, you can protect your investment with insurance to cover catastrophes and contracts to hold tenants responsible for their behavior. Other investments offer no such protection. Additionally, your active involvement in your investment properties can help influence future value, ensuring that when it’s time to see, you can realize a nice return on your initial investment.

Cost Versus Value

Taking on a mortgage on top of what you may already have for your residence can seem like a scary proposition. After all, that’s a cost you’ll have to eat if you don’t have tenants, or your tenants stop paying. Right?

Well, sort of. The risk of absorbing the costs associated with buying an investment property can also be largely minimized. To ensure that your property sits empty for as little time as possible, position it as an available DFW-area rental that would have attracted you, back in your renting days. Ensure that it offers a comfortable place to live coupled with a reasonable lease price.

Additionally, don’t discount the value of thoroughly vetting your future tenants. Adhere to the same income and credit standards used by mortgage companies to gauge whether a tenant is a good fit for your property. Collect first and last month’s rent up front, plus a healthy damage deposit. This helps you to cover for any damage you may have to deal with later on, while giving you breathing room to find a new tenant if your old one suddenly vacates or has to be evicted.

Hands On/Hands Off

Your involvement in your investment property is really up to you. If you prefer, you can be a more hands-on landlord: performing any repair work, taking care of yard work, making upgrades, or working directly with tenants over contacts and payments. On the other hand, if you just want to watch your investment work for you, you can outsource management and maintenance for a relatively low cost to a property oversight firm. You’ll still be kept in the loop over goings-on at your property, but won’t be on call for your tenants.

Low risk, terrific value, and variable levels of involvement: Now, the only thing that’s left standing between you and buying an investment property is finding the best bang for your buck.

For more home-buying advice, check out Coldwell Banker’s Buyer Experience portal.

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Tiffany wasn't born in Texas, but she got here as fast as she could. She and her husband have gained extensive experience buying, selling, renovating and flipping homes in the DFW area. A professional freelance writer, Tiffany enjoys contributing real estate and home improvement articles to the Coldwell Banker site and working with other clients to craft content that's specially designed to generate interest while sharing valuable ideas.

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    January 6, 2015

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