Want to invest in real estate in Columbus, Ohio? If you’re not sure where to begin or what you should be considering, read these tips to start your successful real estate investment portfolio.
The Columbus Team’s Top 10 Tips for buying your first investment property:
- Ensure your financial house is in order
Eliminate all debt if possible. School loans, credit cards, medical bills, and any other areas you may owe money. Not having all these bills allows you to save down payments for your investments faster. It also removes the financial pressure to help you make better, less emotional decisions throughout the process of the purchase.
- Save the down payment
Save a minimum of 20% down. If this is an investment property, a minimum of 20% is required down before you can get a mortgage. If you can pay the entire cost in cash, you have a better chance of winning the contract in tight markets with limited inventory. Sellers will often take an all-cash deal that is less than one that requires lenders be involved. The more you save and pay upfront, the better your cash flow will be while you own it.
- Start small.
Consider investing in an affordable single-family home or duplex first. Keep your investment small so you can net returns faster from the rental income or sale, then take those profits and invest in your next property. Operating expenses and repairs are the most reasonable in this type of real estate. Purchasing multi-family units, commercial real estate, or apartment buildings require a more substantial investment and monthly operating expenditures.
- Establish your parameters.
Know exactly the type of property you’re looking for. Choose the neighborhood, school district, and price point of the property you are targeting.
- Amass your professionals.
To keep your profits in your pocket, it’s best if you have some repair skills yourself. You can save a lot of money by being able to replace a leaky faucet or repair drywall and paint. If you don’t possess these skills, you’ll have to source some affordable local laborers who can do the work for you. Keep in mind this will impact your operating budget. Drywallers, plumbers, electricians. Forging relationships with these people and knowing what the charges are ahead of time will make your investment life easier. Add an excellent REALTOR who will be looking for potential investment properties that meet your criteria. S/he can also connect you with reputable service professionals when needed.
- Secure a loan, if required.
Take advantage of any period of low-interest rates to use a mortgage when purchasing. A lower interest mortgage will keep your operating costs at a minimum and your profits at a maximum. Interest rates are slightly higher on loans for investment properties, so be sure to account for that in your budgeting.
- Plan for Expenses and Profits.
Determine your financial break-even point and how much income needs to be produced to cover your expenses and turn a profit for further real estate investments in Columbus. Also, consider whether the property will need renovations before you can rent or re-sell it. With your first investment, you may not yet have the professionals you can count on in your contact list. You may best purchase a home that does not need immediate repairs or even consider a turn-key home with reliable renters already living there. In a turn-key scenario, you will not immediately need to interview and vet new renters.
- Consider a partner.
An investment partner may be an idea for cost-sharing and profit-sharing and may allow you to start investing earlier. Keep in mind that, like a marriage, a partnership’s success or failure depends on the commitment and shared goals of the people involved. Who you choose may simplify or complicate the process and outcome.
- Keep your emotions in check.
From finding the right property to dealing with adversity in an income-producing home, you must learn to keep your emotions in check. From the purchase to negotiating with tenants and partners can be sidelined by emotions. You’ll need a cool head and a laser-like focus on your plan to keep your new business profitable.
- Evaluate Risk & Reward.
Any investment has risk and potential for reward. If you follow your plan and don’t make decisions based on emotion, you will reduce your risk and increase your chances for financial reward.
Follow these tips, and before you know it, you’ll have purchased your first investment property and be looking for your second!