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Things to Consider Before Purchasing an Income Producing Property

Posted on: January 3, 2017

As the South Florida rental market continues to be strong, it remains a good time to consider purchasing an income producing property. Just like any other major investment, you will want to carefully plan it out to guarantee the greatest chance of returning a profit.

If you have any questions on how to get started in this market, meeting with an experienced South Florida real estate attorney at Schecter Law can be one of your best first steps, along with some of these considerations:

Make sure your finances are in order

Purchasing an income producing property is a major financial commitment, so you will want to have an emergency fund and steady income already established prior to closing on your deal. Unexpected costs can often arise including a wide range of different repairs, appliance replacements, tax increases, periods of vacancy, eviction costs and more.

Be ready for a large down payment

Mortgage insurance is not available for investment properties, so you should plan for a down payment of at least 20% for your purchase. You will likely have a difficult time finding a lender who will settle for anything less than that.

Estimate your ROI

Just as you would with a mutual fund or any other investment, it’s wise to try to estimate your ROI prior to your purchase. Experienced real estate investors recommend searching for properties with a potential return of anywhere from 10% to 14%.

You’ll have to calculate all of your potential expenses including property taxes, insurance, mortgage costs, landscaping, repairs and maintenance costs. You should expect to spend at least one percent of the property’s value each year on maintenance alone.

Don’t rush into buying a fixer upper if you are inexperienced

Unless you are handy or experienced with real estate investing, you should probably avoid most “fixer upper” properties. You can easily end up paying too much on rehabilitating the property in order to get it into renting condition, lowering your profit significantly. It is often better to look for properties that only require modest repairs when you are just starting out.  

Schecter Law can advise you on your next investment

These are just a few of the areas to think about and plan for prior to your next real estate investment. Mark Schecter at Schecter Law is a highly experienced South Florida real estate attorney who has helped many of his clients with purchasing successful investment properties throughout South Florida. Call Schecter Law today at (954)-779-7009 for a consultation or advice.