Whether you are a first time investor, or you’ve owned rental property for many years, making the move to purchase the next investment can often pose various challenges – which is why it is absolutely essential to be as prepared as possible financially.
When it comes to the financing of investment property, there can be any number of ways to get the deal done. But, before moving forward, you need to do a bit of number crunching in order to be sure that the deal will be right for you.
The first step in this process is to be as realistic as possible. While we would all love to have all of the steps to buying and renting out real estate fall directly into place, if you’ve been in this business for any length of time, you know that is rarely the case.
Next, crunching the numbers is key. In order to come up with the most useful figures possible, you will need to have access to the prior year’s tax returns, maintenance costs, and property tax information. Here, you should ideally have access to the seller’s net income and expense amounts, as well as an idea of how much your debt financing payments will be. This should help you to yield the appropriate figures for what your cash on cash return, as well as your return on investment and total return (ROI) may be.
Once you have your numbers in place, you will have a much clearer vision of your purchase parameters. So, no matter how badly you would like to move forward, if it requires you buying the property at a higher price and / or with less attractive terms than your analysis suggests, it may be time to step back and look for another opportunity.
If, however, you do end up adding a (another) property to your portfolio, it can be beneficial to turn over the day to day management duties to a property manager. For more information on how you can benefit by partnering with an established property management team in the Orlando / Central Florida area, Contact Us.