Finding The Best Investment Property For Beginners

Whether you’re starting out in the career of your dream or you’re well established, finding additional wealth opportunities should be something you consider. One area that can lead to great opportunities is to consider an investment property. With an investment property, you have the chance to have some other individual help pay down your mortgage while you gain equity in the property. This strategy is a long game, but one that is quite commonplace as an investment strategy. Here are some tips that will guide you in your Investments.

And if you’re just starting to consider how to finance your life after college, buying rental properties may be difficult and potentially risky if you don’t know what to do correctly. That said, investing in a rental property is a good possibility toward increasing life-long wealth. 

Regardless of what stage in your life you are at, understand that one of the biggest things you need to limit is risk exposure. While some risk is associated with any investment, you want to consider the potential exposure you may have before proceeding and decide if that is something you can tolerate.

Understand Investment Properties

Understanding what is an investment property, knowing the housing market of the area, how a rental can make some income, and how to manage the property if you’re not around are the basics. 

Avoid Risk

When speaking about investments in general, you don’t want too much of your own money involved. Real estate is attractive as an investment opportunity because you can mitigate some of your own risk and leverage others’ money to gain equity. In this instance, you’re using a bank loan for the balance owed and using that mortgage loan to earn you equity over time, versus the traditional way of having to put a lot of your own equity into the investment.

Have A Financial Cushion

For an investment property, the best idea is to have a financial cushion to buffer you when your property isn’t leased or if, for some reason, your tenancy agreement is for less than your mortgage payments. 

As you understand the basics of investment properties, you need to grasp a few more factors in order to be successful with your investment.

1. High Rental Occupancy: When selecting a home, you want to look for one in an area with standard high-occupancy rates for rentals. As a factor, this is crucial as high-occupancy rates mean that renting versus home-ownership is popular, you’ll have a steady stream of potential renters, and it won’t often be that you have zero tenancy between renters.
2. Population Growth: Find an area that people choose to move to rather than moving away from it. This may seem like a no-brainer, but to find high occupancy rates, you want there to be more people interested in living in the area than choosing to move away. This trend also will increase the value of your purchase over time due to inventory shortages.
3. Higher Priced Rentals To Mortgage: You don’t want your mortgage to outprice what you can charge for rent to avoid risk. When you’re looking at investment properties, consider areas that have high occupancies, such as close to a military base, school, or job site. These factors will drive up property values and allow you to charge more competitive rental prices. Again, the goal here is to make more in rental income than you pay in mortgage costs.
4. Low Tenancy Default Rate: Certain areas have higher tenancy default rates than others. Do your research and find a property located in an area known for better tenancy payments so as to avoid unpaid rent or costly eviction proceedings. 

Armed with the basics, you are now equipped to research areas to consider making an investment purchase. Areas that are desirable, have a primary industry such as military, business, or education, and have a scarcity of property available, should be high on your list.

Southern California checks off many of these boxes, though it may be a market for more seasoned and experienced landlords. There are plenty of investment opportunities from Coronado to La Jolla, Pacific Palisades, and Santa Barbara. But one of the most attractive to invest in is the Santa Barbara real estate market. Due to its coastline, lack of space to build outward, and a vast industry built around the University of California at Santa Barbara, securing a potential investment property would be an intelligent consideration.