While purchasing rental property in Erie, Pa. can be an excellent investment, it can also be a challenging process, especially for those new to investing in real estate. It requires hours of work and, for some, an entirely new skillset. Fortunately, Palermo Realty is consistently identifying investment properties in Erie, Pa. that do not fit their current portfolio, making purchasing such properties a much simple process for those looking to try their hand at real estate investment. Before we get there, we should clarify: what is considered an investment property, and what are the best practices for going about purchasing it?
According to Million Acres, an investment property is “a property that you hope to make money from, as opposed to owning for your personal use.” When looking at the ownership of residential property, there are three primary categories to consider. A primary residence is a home that you live in on a full-time basis. You can only own one primary residence at a time, and while you don’t have to live there year-round, it must be your main place of residence. Therefore, a second home would be a property that you live in some of the time. You can have more than one second home, and you may rent them out when you’re not using them — but it’s not your primary residence. Lastly, investment properties – a property you own exclusively for generating rental income and/or an eventual sales profit. Investment properties are not typically used for personal use.
By definition, a “fix-and-flip” home would also not be considered an investment property, as you aim to sell it quickly for a profit. An investment property is one you strictly plan to hold for the purpose of generating long-term income. Now, it is important to note that the specific definition of an “investment property” could change depending on your tax situation. Your lender may also have their own definition that limits personal use of an investment property and rental use of non-investment properties, so keep that in mind while purchasing.
Investment properties are typically considered good investments because A) the borrowing is relatively cheap and B) they arrive with both tax benefits and relatively safe gains as far as financial security is involved. The first thing to keep in mind when purchasing an investment property is that you’re investing in future revenue, not a home for yourself. You could be looking at the nicest rental property in the world, you don’t want to invest in it unless it’s going to make you future profit.
At the same time, it is important to invest in aesthetically pleasing properties that plenty of locals will want to rent. As the property owner, you’ll also need to provide that at an affordable price for the area. In order to do so while making a profit, that could mean investing in fixing up a rundown home. But you want to spend any more than necessary in order to earn a return on your investment. There are some numbers you’ll know or be able to estimate with accuracy that should help when making the best investment choice for you. These numbers include the purchase price of the property, your down payment, your mortgage interest rate (which may differ from that of someone purchasing the home as a primary or secondary residence), along with your monthly payments.
Fortunately, Palermo Realty makes this process easier by consistently identifying a number of great investment properties for those looking to enter the world of real estate investment in Erie, Pa. While these opportunities do not fit into our current portfolio, typically because of location management considerations, they could offer cash flow and long term benefits to an individual investor. Our knowledgeable team is happy to walk you through the details of how investing in the right rental property can help build your portfolio. Contact us to stay in the loop anytime an investment property with Palermo Realty becomes available.