Investing in real estate is one of the best ways to invest in your future however, there are many more things to consider when buying a property for investment purposes than just buying a home to live in. First you should decide what your goals are and why you are purchasing the property. Is your goal to achieve long term or retirement income? Or are you looking to own the property short term to turn a quick profit? Both can be good ways to make money however you must look carefully at how this investment will perform financially. In order to secure a loan for an investment property a bank will, most likely, require a 20% down payment on the purchase price of the home. For example, if you had $100,000 to invest, you would be looking to buy a $500,000 property and you would be loaning $400,000 or 80% of the property value.

Next, you should have your Realtor give you a realistic idea of what that home would rent for. Let’s say that your total payment, including principal, interest, taxes and any association dues, is $3,000 and that the approximate rent is $2,800. You would then have a negative cash flow of $200 a month. Is that an amount that you would be willing and able to pay out on a monthly basis for the length of time that you own the property? There may also be tax benefits to you that could reduce this amount, and maybe even more, at the end of the year (you should always refer to an accountant for tax advice). Meanwhile if your property is appreciating then you could very likely be way ahead of the game!

On the other hand, you may be looking to buy a home and turn a quick profit. This requires more risk however, if done correctly and the housing market conditions are right, you may have an opportunity to turn a large profit in a very short period of time. The best part is that you are not tying up your investment dollars for a long period of time so you can put your money to work for you over and over again!

Since everyone’s circumstances a different we recommend that you contact us for more information so that we may discuss what would be best for you.