The appeal of income properties and the potential for what may seem like easy money and early retirement have likely crossed the mind of anyone who has heard of this business venture. There is a lot more to consider before entering the income property game, however, than simply purchasing a property and watching the dollars roll in.
Here are a few things to consider before launching into your new career.
Can You Recognize An Income Property When You See It?
There are a lot of features that make a good income property. Whether you are considering flipping it for a profit or renting it out to potential tenants, knowing what to look for is more than half the job. Can you realistically estimate what the cost of renovations to the property will be? Do you know what the value of the home will be after the renovations, based on its size, location, etc.?
Do you know what the market rent would be for the property? If you can’t answer any of these questions you either have a lot of work to do, or you may want to reconsider.
Not Scared Off?
So you think you can reasonably identify an income property and are still interested in making your first purchase. Here are a few tips for making that a success!
Know Your Intent — Whether it’s flipping or renting the property, you should have a clear picture before you make the purchase. Have an estimate of what the renovations will cost as well as the profit margin of the investment, both in the short and long term.
Consider Splitting The Costs — Many people who enter the income property market reduce the risk by having partners. Whether it’s a friend, relative, or business partner, this may be the right decision to minimize your risk in your first venture.
Make It Your Business — Whether you plan on doing this as an additional source of income or you are going into it full time, realizing that this is now a business will prevent you from losing a fortune. You will spend a lot of time getting to know both the real estate and the home renovation industries, and the more you know, the more successful you will be.
Deciding to get into the income property business can be a time consuming, but ultimately very rewarding, venture. Like any business, the effort you put in and the knowledge you have will determine the success you achieve.