Residential investment properties can be great “bullet-proof” investments if you do your research.   Focusing on real estate comps in your targeted areas will tell you which areas are good investment locations.  Addtionally, below are three fundamental steps to follow before making a plunge in the property market.

1. Find a mentor and network with other investors

Finding someone that has “been there and done that” so to speak will save you lots of time on your journey.   Meeting other investors and experts in the area can help inform your decisions and take the guesswork out of buying a residential investment property.  Joining my coaching programs is an excellent way to manage this!

2. Make sure your finances are strong

This doesn’t necessarily mean that you have all of the cash required in the bank. You should just make sure that equity in your existing assets such as your home can be leveraged to purchase a suitable property and you have enough cash flow to cover repair costs.

You have to have a stronger financial base with buying an investment rental property than you do a property that you want to live in because defaults on investment properties are generally higher.  Therefore, the interest rates you are paying are often reflect this and you need a higher down payment.  Your silver lining here is that more attractive lower interest rate.

3. Choose your investment property carefully

With owner occupied properties, you make money when you sell. With rental investment properties, you are making your money when you purchase.

So you need to choose your area quite carefully. Many first-time investors are afraid to get out of their comfort zone and, instead, purchase a property in an area near their home. This may not be the best choice from a pragmatic investment perspective.

A smart buyer considers the demographics first and does their research with InvestorCompsOnline and often chooses properties outside of their district to get the highest possible return.