When purchasing an investment property, there are several main costs involved that the buyer should know about before making the investment. There are costs, but the opportunities and benefits of investing in a worthwhile property greatly outweigh these costs. There are plenty of opportunities to invest nowadays, even in this economy. This is especially true in a place that already has a strong economic base, such as Lubbock, Texas. Housing is affordable there and it’s a popular place for young families and retirees. It has mild, sunny weather, good schools, great healthcare, and more. Thus, purchasing an investment property in Lubbock is a great way to make money.
One major cost is mortgage interest, and a potential buyer probably wants to figure out the details of the loan options first, just to get an idea of what the current rates are. The greater amount of money you put down initially, the less your loan will be. That means you will have much less interest to pay every month. Also consider the type of loan and whether or not the mortgage is a fixed rate. Talk to more than one bank or broker to find the solution that’s right for you.
Another cost of investing is taxes, which can seem complicated, because they change from year to year. Right after a purchase, taxes can go up drastically. If you want predict your future taxes, look at the purchase price and the current tax rate to get a general idea. Vacancy cost is a third important factor. To find out what the average vacancy rate is, you just have to do some research and a little investigating.
One cost that can vary from case to case and to definitely be aware of is the cost of tenant turnover. The cost of this can often be (but not always is) surprisingly high, and includes anything involving finding a new tenant or renter. From advertising to cleaning, to painting and repairing the property, this cost is something you must take into consideration, especially if you expect to have high turnover, say, with college students.
Other costs of buying any investment property are insurance costs, maintenance costs, and utility costs. For insurance, you can get a quote on the property rather than guessing what the insurance is by looking at the bill for your house. This is a more accurate way to get the insurance rate, because investment properties’ insurance usually cost more than family properties. Maintenance costs are difficult to estimate, but depend on factors such as the size of the property, the type, and the location. Finally, to determine the utility costs, you first must decide what you will pay for as the own and what the tenant will be expected to pay for. These are the major, basic costs involved when purchasing an investment property in Lubbock, Texas, or anywhere else.