Owning an investment property is no easy feat. The general perception from the public is that how hard can it be to own and rent a property.
Well, it turns out it’s not that easy. Being the owner of an investment property comes with many risks, planning, hard work and ability to constantly evolve. Those who investment and taste the path of success in investment property become accustomed to that lifestyle and they start to see a path being carved for themselves. That path leads them to buy a second investment property.
If you read through real estate blogs about investor’s experiences and what made them get into real estate investments then you would be surprised how much you would relate to that. Each person enters real estate for a different reason, whether it is financial stability, enthusiasm about the market or building a small empire. Investors who succeed with their first investment property start seeing the potential of the real estate market. Their natural reaction is well if I could be successful with my first attempt then my second attempt must be easier. What they see is the potential to make double or triple the money they aimed for before it all started. It is all about ambition in real estate.
There are so many reasons why it is recommended to buy a second investment property if you have the means for it. Wanting to expand your horizons might be risky, but its one worth every ounce of risk involved in it. The purpose of the first investment venture was making money, so why would an investor back down when more money is being involved. More profit means a better reputation, creativity and hard work. This is why it is absolutely crucial for the investor to know the correct timing to buy a second investment property.
The reasons involved that will determine whether your timing is correct to buy a second investment property or not is mostly personal but some are general.
5 Reasons to Buy a Second Investment Property
Testing the Waters
Before even thinking to buy a second investment property it is important for you as investor to go through a year or two with your first one to see how it fares. When you enter a new investment which you lack experience in, it is normal to be hit with unexpected costs or be unaware of how the taxing system will work. The taxation of your property’s income will depend on how much you make which you are certainly not aware of. This is why it is advisable to wait for a short time before contemplating buying your second investment property.
Related: Everything Real Estate Investors Should Know About Tax Season
Mortgage Rates
The most obvious reason for all investors whether they are first time investors or multiple investors is the very mortgage rate levels. It is just sensible to use the advantage of a stable economy and a mortgage rate that has descended to its lowest rate in ten years. If an investor who is looking to buy a second investment property thinks it is too risky because of expenses and mortgage rates for two properties. Well think again. The upside of owning two properties is that the mortgage rates basically pay themselves and pay off your property as well. Having the second property for rental generates more money that allows you to easily pay off interest for two properties and cover their expenses.
Related: Paying Off Investment Property Mortgage Early: Pros, Cons, Tips
Experienced Investor
The best indicator of correct decisions and timings is your own personal experience. Before buying a second investment property and you ask yourself, how did I fare with the first property? If your property is meeting your needs, generating money and being rented then you have probably done a decent job. Experience makes the difference in these situations, and with that vital experience it will be easier to save money on the second property by avoiding some of the mistakes you did first time. The learning experience from the primary property you have owned will be invaluable.
Managing Properties
Being the landlord of one investment property is enough to cause a serious headache with all the requirements and hard work necessary to remain at the top. When there are tenants involved it all becomes harder for the landlord or investor because they have to meet the demands of tenants on a regular basis. This results in a loss of time, energy and willingness for the job, so imagine how much tougher it is when there are two properties involved. There are investors who have been able to manage these problems either by themselves or by using property management professionals. This proves that they are ready to take the next step in real estate investing.
Understanding Gains and Expenses
Making studies that combine the first property you own with the second property you’re considering in terms of expenses and profits is advisable for you to understand where it is heading. The key to know if it is time to buy a second investment property is expanding your financial goals. Not being satisfied with the financial gains from one property is the go ahead you need to start looking at other properties.
In conclusion, to buy an investment property is a matter of understanding your personal willingness for it. Understanding the reasons mentioned above and evaluating each of them will of course make the decision easier to make based on more assessments and assurances. If your goal is to become a real estate big player that leads you to financial growth with every step then considering your second property is vital.