One of the best ways to earn money for your retirement, the purchase of an investment property, can also be one of the easiest, but only if you know what to look for. Do it right, and by the time you’ve retired, the house will have paid for its own mortgage, leaving you with a nice little supplement to Social Security and whatever other retirement income you may have. Do it wrong and it can be a nightmare of expenses, costing you more than you have to keep it up and running. Our guide will help lead you in the right direction, avoiding most if not all the pitfalls that can accompany the purchase of investment Smith Mountain Lake properties!
Determine How the Property is Going to be Used
Not every investment property will serve the same purpose. Some will be used as family rental homes, others will be commercial investments, and still others will be used as vacation rentals. If you’re thinking you want to rent for vacation purposes, purchasing a home in the farm country of Iowa may not be your best idea, but purchasing a Smith Mountain Lake home right here in Virginia can be the smartest decision you’ve made this year!
Return on Investment (ROI)
Obviously, you want your outgoing finances to be far lower than what is coming in, but what is truly considered a great ROI? Generally, expenses on an investment property run between 35-80% of your income, with the lower number being your optimum goal. Expenses will include mortgage payments, utilities, HOA fees, and of course, an emergency slush fund. Vacation properties may have added fees for property managers and housekeeping, in addition to the standard maintenance and upkeep.
Starting the investment process with a home that is too large can be a scary and costly mistake; large homes cost more all around, and if for some reason the property you purchased goes unrented for 6 months or longer, you could find yourself losing more than you can spare. Investment experts suggest starting with a home in the $150,000 price range. With a standard 6.5% loan, your monthly output (not accounting for utilities and maintenance) would be approximately $1000. If that number doesn’t escalate your heartbeat, you’re ready to make the purchase. If you find yourself having palpitations, look for a smaller home and smaller price. Fixer uppers can be a great deal if you have the initial income available to make your investment a tenant favorite!
The first investment can be scary for potential buyers, but when you choose one of our knowledgeable realtors at Smith Mountain Lake Properties, we can take the tension out of the decision! Give us a call today and let’s start working on making your future bright!