Choosing Atlanta for your first investment property is a wise choice. Its beautiful neighborhoods within a city that has everything make Atlanta an excellent housing market. As a first-time investor, no matter where you’re investing, the options and decisions are overwhelming. We’ve created seven tips for buying your first Atlanta investment property to help steer you in the right direction, toward the right property and a worthwhile investment.
Pay Down Debt
Before purchasing an investment property, make sure you’ve got some wiggle room in your finances. If you’re deep in debt, it’s not wise to take on a new property. Be patient and pay down your personal debt first, so you can invest without worrying about the investment possibly breaking you.
With property investment, you have to prepare for the unexpected. Properties require maintenance, and sometimes things break, requiring expensive repairs. Also, there may be times you’re stuck paying the mortgage because the rent isn’t covered. Once you’re debt-free, those repairs and months of paying the rent won’t be as frightening.
Prepare With a Down Payment
Rather than scramble when closing is near, have a good chunk of money ready to go for a down payment. Plan for an amount a bit higher than what you’re predicting, just to be safe. Interest rates and down payments tend to run higher for investment properties. Don’t be caught off guard.
Once you own property, you are completely responsible for it. When tenants occupy the building, they are only responsible for the rent and whatever else you agree on. The building itself is your responsibility.
Let’s look at some duties that become yours as soon as you make the investment:
- Follow all federal and state laws for a rental and know them well.
- Collect rent.
- Respond to maintenance needs.
- Respond to complaints.
- Deal with uncooperative tenants.
- Maintain a safe and structurally sound building.
- Advertise your property.
- Fill vacancy when necessary.
A landlord has a lot of responsibilities and not everyone is cut out for the job. An excellent option for those who own rental property is to hire a property manager.
A property manager fulfills all of the above tasks for you, and in turn, the property owner pays them to do so. This option alleviates the stress of owning the property and also becoming a landlord.
What Type of Investment?
Debt is paid down, you’ve saved for a down payment, and now it’s time to decide what type of investment property you seek. There are two options: commercial or residential.
Commercial Property Investment
A commercial property investment is usually used to rent to others who need the commercial space. Commercial property could also be an apartment building. Commercial real estate has its own set of rules and laws, and it’s best to find a real estate agent who specializes in commercial properties to help you out.
Residential Property Investment
Residential property investment is the purchase of single-family homes which are then either flipped for resale or rented as-is. Here are the differences:
- House Flip: Flipping houses means a home is purchased below market value, renovated, then sold at a higher price or kept as a rental investment. Many house flippers work as a team and split the investment.
- As-Is: Some investors prefer to find a home in move-in condition and begin renting immediately. This is the easiest option but it’s not always as lucrative, or it may at least take some time to see a decent cash flow if the investor is still paying a mortgage. If the home is purchased at full price in cash, then buying as-is works very well.
Create a Team
It’s never a bad idea to create an investment team rather than jump in alone. Even when buying a home in great condition, having an assembled team saves time and money. Let’s look at who an investor might want on their real estate investing team:
- Real estate agent: An agent is priceless, as they know the market better than anyone. They can also lead renters to your new investment property. When searching for a property and then possibly searching for renters, an agent saves the investor a lot of time.
- Home inspector: Adding a home inspector to your team means you won’t have to search for an inspector every time as you continue investing in other homes. You’ll also build a trusting relationship.
- Electrician and plumber: Ask both a trusted electrician and plumber to join your team so when the need arises, you know who to call.
Your team members need to get something out of the deal, so of course, they’ll need to be paid. You can decide with individuals what they prefer. Will you pay them each time they help, or would they rather have a percentage of the investment?
Work out a deal that helps everyone. If anything, as you continue investing, your team members may offer you a discount because of the constant turnover and referrals.
Know Your Numbers
Don’t jump in headfirst if you have no idea what your ROI (return on investment) will be. This is where understanding the market is essential. Your investment includes not only the purchase price, but also any money you have to put into the property. Consider the following numbers as you determine your ROI:
- Target demographic
- Rentals nearby
- Vacancy rate
- Market value
- Down payment
- Interest rates
Have a Backup Plan
Don’t let the idea of a backup plan discourage you. Backup plans are wise and not always used. As you research, you may find that now isn’t the right time to invest in property. Or just the opposite, you may learn that the time is now, so strike while the iron is hot.
Hopefully, our seven tips for buying your first Atlanta investment property becomes your helpful resource as you begin your investment journey. The first property investment may seem overwhelming, but as you continue, you’ll be thankful you took the time to understand property investment.
At Excalibur Homes, we are dedicated to Atlanta investment properties and property management. We have proudly earned the title “Best in Georgia” thanks to that dedication. Contact us and let’s turn your vision of real estate investment into a reality.