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Buying an Investment Property Before Your First Home


This is the usual train of thought most people have before buying their first property:

“One of my goals is to one day own where I live. That way, I won’t have to keep paying the monthly cost of the rent. Instead, I can be making my own mortgage payments. However, relocation for work then does become an administrative nightmare, so maybe buying my own home isn’t the most practical.”

Sound familiar?

There are great reasons to buy an investment property to rent out. Compared to buying your own home first, investment property has the benefit of creating an income stream.

Below are other good reasons why buying an investment property in Tampa, Florida before your first home is more reasonable in the long run.


1. Property values keep rising.

Recently, the values of properties keep rising each year. This is as good a time to buy as any. People will naturally opt to rent than to buy a property for homeownership. There are a lot of contributing factors that have raised the value of properties. Some of the main reasons include a healthy labor market, a booming economy, and a large millennial group as demographics.


2. Low-interest rates.

Interest rates in Tampa, Florida, tagged as below 5%. These rely on a lot of factors like one’s credit score, debt to income ratio, and the down payment amount. If your down payment is 20%, naturally the interest rates are manageable.

Credit scores are important to qualify as a strong borrower when you apply for a mortgage loan. Maintain a credit score of above 740 so you’ll find lenders much more open to approving your loan application. It’s also important to have bank reserves so lenders will trust your capability to pay. They always check the borrower’s debt to income ratio.


3. It’s expensive where you want to live.

If you have an ideal neighborhood you prefer to live in but find that the property is more costly, buy a property elsewhere. Then turn this property investment into an asset by renting it out.


When you have saved enough from the rental profit, you can proceed to buy the property where you want to reside. You can have the option of selling your initial property or further letting it appreciate in value over time.


4. Lifestyle flexibility.

If you’re young and single, you have a higher chance of having more disposable income.

Why not invest in a real estate property?

You’ll look back one day and congratulate yourself on making a wise decision. Owning a home may not be your priority right now in terms of your mobile lifestyle. Constant traveling or job changes might prevent you from being tied down to a single location. However, investing in a rental property at a young age will yield fruitfully in the future. Properties will appreciate in value and if you’re young, you’ve got time and cash to spare. You’re also not tied down with financial responsibilities that will burden you from paying monthly mortgage payments.


5. Tax benefits of buying an investment property.

One of the biggest benefits of buying an investment property is the tax break. There are large tax deductions accorded to landlords. They can save on interest on mortgage loans and business loans applied for property renovations. In terms of rental property depreciation, declaring the property’s depreciation amount is tax-deductible in the first year of ownership. Afterward, the depreciation can be subtracted in smaller amounts over a longer period.

Landlords can also take advantage of claiming property expenses. There are several property expenses that are tax-deductible each year. The cost of repairs like repainting can be deducted from taxes. Another would be the use of your personal property. For example, the furnishings used in your rental. Don’t forget to declare your insurance premiums as well. Fire, flood, theft, and landlord liability insurance are treated as tax-deductible. Other claims for tax reductions are travel expenses, legal services, and home office deductions.

It’s vital to speak to a professional accountant who has expertise in tax reductions so they can help you save money. This way, the return on your investment is quicker and your income is maximized.


6. Invest to gain a steady monthly income.

An investment property that you use as a rental can be a lucrative income stream. Instead of buying a home where you’ll be shouldering mortgage payments, an investment property will pay off for itself.


For example, if the mortgage payment for an investment property is 1,000 dollars per month but you earn 2000 dollars from your tenant’s rent then you earn extra. The other 1,000 dollars could pay off a debt, your monthly rent, bills, or become your savings. If you’ve saved enough of your extra income, you can invest in another property. This way, you can earn even more additional income.


7. Income generated from an investment property will be used to buy the desired property.

When you buy your investment property, you might be limited to an affordable choice. However, once your investment property creates equity then you can use it to leverage buying your new home. You can now have the option to buy a property in a neighborhood you desire by gaining more opportunities from your initial investment. You have the option to sell it off or hold on to it as a steady income-generating investment.

In the end, when you find another good investment opportunity, lenders are more open to letting you borrow a large amount. Qualifying for a loan will be relatively easier as well. Even better, you can drop a bigger down payment letting you enjoy a far lower interest rate.


Advice on Investment Property Search

Look for foreclosed homes and properties from banks. The prices are generally low, and they have huge potential for equity. With little property improvement required, you can open it to the market for rental or resale.


First-time investors can make the most out of a low mortgage rate and inexpensive financing. These properties are considered to be a bargain and can be a great introduction to the world of real estate investment.


Bottom Line

It’s important to explore your options in regard to owning your home. Exercising patience in the face of the competitive real estate market will be rewarding. Investing in a property for business purposes is a great way to create more opportunities for your homeownership down the line.

If you have any further questions, don’t hesitate to contact us at Advantage Realty Services today!


Posted by: stephenfox on October 24, 2019
Posted in: Uncategorized