On Twin Cities Live: Advice on Buying an Investment Property
If you’re looking for a way to diversify your portfolio and make your money work harder for you, considering an investment property can prove to be a great choice. We visited Twin Cities Live on KSTP Channel 5 to share our advice.
A few highlights:
Time of Year:
- Winter is a great time of the year to purchase as competition from other buyers is lower
- Sellers that have been on the market for a while are motivated to sell so they can avoid holding on to their property until Spring
- Also think about timing of renters. If you can push the closing date so you can wait to find a tenant in February or March, you will likely be able to collect more in monthly rent.
- Move quickly! Once you have the property under contract you will have an inspection period to do your due diligence. Waiting too long to jump on a great opportunity could cause you to miss out.
Type of Property:
- Research and choose from single family, duplex, multi family, or commercial
- Ask yourself whether you are you willing to put the work in to update a property or if you are looking for something ready to rent immediately
Paying for the Property:
- If you finance, you will need to put at least 20% down
- Make certain you have enough money for a down payment plus repairs that will be needed, including unexpected ones.
- Even if you have enough cash to purchase upfront, you may want to finance because of how low interest rates are.
- Understand tax benefits
Cash Flow or Equity Growth:
- Are you purchasing for cash flow, equity building, or a combination of both?
- Do you want a high monthly cash flow? Rents may be very strong in an area compared to values but there may not be as much potential for the property to increase in value.
- Or, would you rather have lower cash flow but higher opportunity for the property to increase in value in the future?
When assessing cash flow, you need to think about the following things:
- Mortgage payment
- Property taxes will be a little higher as they are non-homestead taxes
- Any utilities
- Money for upkeep and repair
- Costs to managing the property or hiring a management company
Team of Advisors:
Make sure you work with a knowledgeable realtor and have a good network of advisors, including a realtor that owns investment properties so they can advise from experience and help you make relationships.
- Insurance agent
- Property manager
Watch all of our Twin Cities Live segments on our You Tube channel.