Buying, Selling, Renting

Should You Buy an Investment Property? Making the Math Work

Many property owners who have the financial means decide that they might want to invest in an additional condo as a rental property. This type of investment obviously has to be made carefully, as the potential for loss is as big as the potential for gain. But for those able to pull it off, a rental property (or even several) can be a great long term investment.

Should You Do It?

The first step is finding the right property. Most investors tend to stick with parts of town, or even buildings, they’re familiar with. There are numerous benefits to investing in something you’re already familiar with.

Then, there’s the matter of making the money work. If you’re purchasing a property to invest in, you’ll need to put in a full 20% down payment (at least), unlike what you’d have to do when buying your primary residence. One thing that’s definitely on the side of investors is that interest rates are still low compared to the rates before the pandemic. Investors are able to secure loans near 3%, and the lower the interest rate, the easier it is to make the math work on an investment property.

Making It Work

The key to keeping investment properties profitable is that you want positive cash flow at all times. The annual rent you’re able to collect on the property has to be more than the mortgage payments, property insurance, property taxes, and any additional operating fees like homeowner’s association fees or property management expenses. And, ideally, you want to leave yourself a cushion of about 7%, so that either you can get a return on your investment, or that if your property is without a renter for a couple of months, you won’t be in the red.

Last but not least, be sure to invest in a building that has a solid property management company keeping it operating smoothly.

If you already have an investment property and have questions about how a property management company can help, reach out to us!

Ready to manage your building with ease? We’re ready to jump in!

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