If you’re a first-time property investor in Boise, it is hard to know what type of rental property to invest in. There are several different property types, and each one has its own pros and cons. For beginners, experts generally recommend acquiring a single-family home. But should you focus on foreclosures, older homes, or new construction? With so many choices available out there, it’s vital to be familiar with each one before embarking on your real estate investing journey.
Experts often recommend that single-family homes are the best choice for a first-time property investor. They tend to attract tenants that are more financially stable and want to stay in the house for a more extended period. That type of stability is essential when you are first starting. However, you also need to find a rental property that is within your budget. That desire for a great bargain often leads new investors to consider buying a foreclosed home.
A foreclosed home is a property that has been reclaimed by the bank that holds the mortgage. Buying a property from a bank, comparing it to a private owner, has a few competitive advantages. Banks are often more willing to negotiate on the price for buyers who can close quickly. Another advantage is that you won’t need to be concerned about whether the property has a clean title or not. The bank will clear any liens or back taxes owed for you. Even though the buying process will be different for a foreclosure, you can still qualify for a range of mortgage options that include both VA and FHA loans.
However, buying foreclosed properties does have a few pitfalls as well. One of the biggest problems for buyers is that foreclosed properties tend to be sold as-is. The property may have been sitting vacant for some time, allowing maintenance problems to develop or worsen. The previous owners may have also damaged the house on their way out. It is not uncommon for owners to leave foreclosed properties in very bad condition, knowing the buyer will bear the cost of renovations. It is not recommended to purchase a foreclosed property unless you have enough cash on hand to repair it.
When looking at older homes, you may encounter similar issues. While many older homes have been maintained well, these surely won’t be the best deals. But then again, it is important to avoid fixer-uppers, particularly if you don’t have enough capital for a contractor or the skills to do the work yourself. The lower-budget properties will often come with issues, which can range from simple cosmetic repairs to severe damage. However, older homes do have their advantages, too. Purchasing a home in a well-established neighborhood can help you calculate a more competitive rental rate and even attract tenants who want to live in a certain location or community.
On the other hand, buying a brand new house as a rental property is becoming more common. Nearly all tenants are always willing to spend more to rent a house that no one else has lived in before. And you can often have more say in the design and style of the house. Newer homes will require much less maintenance and repair and may have a lot of potential to increase in value relatively quickly. Be warned, however, that counting on appreciation is always a risk. This is the same for new construction, where property values can be even more difficult to determine. In selected areas, you might need to hold onto the home longer to gain any significant returns, and new construction is often located farther away from amenities, urban centers, and public transportation. It may discourage some tenants from renting the home.
With both pros and cons for each type of investment property, the one you ultimately choose is a matter of personal preference. Both older homes and new construction are often relatively easy to finance, with lots of available different mortgage options. There are several financial resources available to investors for each type. Nevertheless, it is essential to note that budgeting for every kind of home will be different due to the unique properties of each one. Also, as a first-time property investor, it is vital to know as much as you can about each specific advantage of the property before moving forward with your investment.
When you purchase your new rental property, you’ll need someone to manage it. The Boise property managers at Real Property Management Boise can handle everything from move-in to move-out. Contact us online or call us at 208-494-1800 for more information.
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