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Investing in real estate can be a lucrative way to build wealth and generate passive income. But like any major investment, it requires careful planning, research, and due diligence to avoid costly mistakes. In other words, you have to know what you’re doing.
Sometimes, the best way to learn the right way to do something is by understanding the wrong way. And that’s what we will focus on today. In this article, we will cover some of the common mistakes to avoid when buying an investment home in the state of Washington.
Homes in Washington tend to hold their value well over the long term. You can look at any of the major home-price indexes over the past 30 years and see this for yourself. Because of this, buying investment property in Washington can be a sound investment.
Here are some of the mistakes to avoid along the way:
Buying an investment home in the state of Washington without doing the proper research is a recipe for failure. That’s probably something we can agree on. But what kind of research do you need to do before investing in a property?
At a minimum, you’ll want to research different areas, neighborhoods, and types of properties to determine which one suits your investment goals. You should also review investment-related factors like rental rates, vacancy rates, employment opportunities, crime rates, and school districts. All of this information is available online.
It’s also important to understand the local real estate market where you plan to buy an investment home. Pay particular attention to recent market trends, inventory levels, and the supply and demand factors that affect property prices.
As for the property itself, you want to ensure that the home’s condition, features, and amenities will meet the expectations of your target renters or buyers.
And don’t forget the neighborhood that surrounds the property. After all, when a person buys or rents a home, they are also buying into the neighborhood that surrounds it. By analyzing both the property and the neighborhood, you can avoid costly repairs, attract higher-quality tenants, and increase your property’s value.
Another common mistake investors make is not having a clear investment strategy. Before you start searching for a property in Washington, you should identify your investment goals and objectives. These goals can vary from one investor to the next.
Are you looking for a long-term or short-term investment? Do you want to generate cash flow or appreciate your investment over time? Once you know your goals and objectives, you can create a clear investment strategy to guide all other decisions.
This process will also help you identify the type of property that best fits your investment goals and objectives. For example, if you want to generate cash flow, you might consider a multi-unit property that can generate rental income from multiple tenants.
If you want to appreciate your investment over time, you might consider a single-family home in an up-and-coming neighborhood with a strong potential for appreciation.
Lastly, you want to have a good understanding of your target renters or buyers. Who are they, and what do they want in a property? This will help you identify the types of homes that appeal to them and meets their needs.
For example, if you’re targeting young professionals, you might look for properties that are close to public transportation, restaurants, and nightlife. If you’re targeting families, you’ll probably want to choose properties that are close to schools, parks, and other family-friendly amenities.
Another costly mistake when buying an investment home in Washington is overlooking the property inspection. A professional home inspection can reveal underlying issues or repairs that can affect the property’s value and your investment returns.
An inspector can check for a wide variety of property issues, such as structural damage, roof leaks, plumbing issues, electrical problems, and pest infestations. All of these things can bring unanticipated costs into the picture, so you want to identify them early on.
Identifying these issues before buying the property can help you negotiate a better price or avoid a bad investment altogether.
Overpaying for a property is another common mistake that could hurt your investment returns. You can avoid this issue by appraising the current market value of the home.
The “market value” is the amount that buyers are willing to pay for a particular home in the current market. Property valuation is affected by various factors, such as location, condition, size, features, and amenities. By determining the market value before you buy an investment home in Washington, you can avoid overpaying and maximize your investment returns.
One of the best ways to do this is by analyzing comparable sales. Whether you do the appraisal yourself or hire a professional appraiser, you want to take these “comps” into consideration.
Comparable sales are properties that have sold recently in the same area, with similar features and amenities as the property you’re interested in buying. This information can help you determine the property’s fair market value and negotiate a fair purchase price.
Specifically, try to focus on properties that sold within the last six months and are similar in size, location, condition, and features. These are the characteristics of a good comp.
When buying an investment home in the state of Washington, you want to include all property-related costs within your budget. And that goes beyond the purchase price itself.
Some investors focus on the purchase price while overlooking other costs, such as closing costs, property taxes, insurance, and financing fees. By including all costs in your budget, you can ensure that you have enough funds to cover expenses and avoid financial difficulties down the road.
Maintenance and repair costs are another important consideration when buying an investment property. All homes in Washington require ongoing maintenance, and some of them also need repairs and upgrades in order to attract the right buyers and renters. These things can add up over time. So you want to include them within your budget to avoid surprises down the road.
Lastly, be sure to factor for any vacancy and property management costs when buying an investment home in Washington. Vacancy costs refer to the loss of rental income when the property is unoccupied. Property management costs include fees paid to property managers, who can help find tenants, collect rent, and handle maintenance requests.
By identifying and understanding these costs, you can better estimate your net rental income and ensure that the property generates positive cash flow.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.