Sunday, March 3, 2019

HOW TO KNOW IF YOU SHOULD BUY AN INVESTMENT PROPERTY TO RENT

HOW DO YOU KNOW IF A RENTAL PROPERTY IS A GOOD INVESTMENT?


Ready to purchase an investment property, but not sure if it will be a good investment? It can be stressful and challenging to take that leap and make the large investment. There’s mortgage interest, taxes, insurance, realtor fees, and all kinds of other expenses. It’s enough to make your head spin!!
So, you’ve been thinking about purchasing your 1st, 2nd, or 3rd rental, and you’re asking yourself, is this worth the investment? How do I know if I should invest in this property?


Relax! I’ve got the answer my friend! My good peeps over at Biggerpockets has this awesome rental calculator, to help you see if it will be worth your time. However, there’s a couple things you’ll need to do before using any rental property calculator.
  1. Look up market rents in the area: Check out about 10 comparable rentals in the same zip code. Ex: 2Bed, 1 Bath Houses in zip code 12345 rent for $900 on average.
  2. Estimate what you think it would cost to do upgrades on the property. Always say it will be more than what you think it will be because there’s always a chance that something will come up that will be an extra unexpected expense…. There’s ALWAYS something! So if you think it will need 5k in upgrades/repairs, estimate it at 7k just to be on the safe side.
  3. If your credit is not the best, just estimate at one of the higher percentage rates for the mortgage. You can find out more info about mortgage interest rates here.


Now that we got all of that out of the way, check out this screenshot of a calculation I did with the  mortgage calculator! It breaks everything down for you, and lets you know what your estimated cash flow will be.

(Toward the top right, you can see $449.04 monthly cash flow after paying mortgage and everything else.) 

And finally, here is the awsome mortgage calculator put together by the good people at BiggerPockets!


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