Can you afford your real-estate investment dreams?
At Home Loan Cash Back, we help you to get the best deal on your mortgage – regardless of what you’re looking for a home loan for. New investors frequently ask us how much money they’re going to need to start buying property, but the unfortunate answer is that there’s really no one-size-fits-all solution when it comes to real estate.
Here are some expenses you’ll need to think about when deciding whether real-estate investment is right for you.
Making a Down Payment
When you purchase a home as a primary residence, you’ll be looking to make a payment of around 20%. Sometimes, lenders will allow you to put down less, depending on the type of loan that you’re applying for. However, with investment properties, there’s more risk to think about, which often translates into bigger deposits.
Before you start thinking about buying investment properties, think about how much cash you realistically have to put down on your new real estate. You could need to pay anywhere between 25 and 35%
Investing in the right level of insurance is crucial to protecting your new investment as a property owner. How much insurance you’ll need to have, and how much you’ll have to pay for your coverage will depend on a number of factors, including the size of your new structure, the value of your property, and where it’s located.
For instance, if you’re located in something of a rough neighborhood, then you might need to pay more for your insurance than you would have to in a neighborhood that’s known to be pretty safe and secure.
Repairs and Maintenance
Another expense you’ll need to consider is how much you’ll need to pay in terms of repairs and maintenance. If you’re acting as a landlord, then you need to make sure you keep your investment property looking pristine. This will help you to attract tenants, and ensure that you’re able to sell your property again at a later stage.
A good idea is to set aside up to 15% of the amount you charge for rent every year to help you cover the costs of maintenance and repair. That way, when you need to have something fixed, you don’t have to deal with the expense out of pocket.
Dealing with Unexpected Costs
Before you begin sinking all your cash into an investment property, you’ll need to make sure that you have enough money to cover any unexpected expenses that might emerge. In most circumstances, it’ll be a good idea to have someone living in your property at all times, but when you are facing a vacancy, you’ll need to have enough money to pay the mortgage until you find another renter.
Sometimes, the best thing you can do when you’re getting involved with real estate investment is make sure that you have a safety blanket available to protect you when something goes wrong.
The Bottom Line on Investment
Investing in real estate property can be a wonderful way to make your future look a little brighter. However, it’s important to remember that you need to be able to afford the expenses of owning a home. When buying a property, look at more than just the mortgage itself to decide how much you can reasonably afford.
Don’t worry, Home Loan Cash Back will help!