Austin Texas – It feels great when a person is finally able to own a property of his own whether it is a duplex or up to a fourplex. But when the matter of first investment is concerned there are some steps which should be perfectly followed before buying a real estate. While choosing a property not only the present value of the property is to be considered but the future chance of the increased price of the property is to be considered cleverly. In Austin a duplex, triplex and fourplex properties usually require 10-20 % down payment. The goal should be to buy a property with high CAP Rate and low GRM so that the loan is easily covered per month.
CAP Rate:
(rental income after expenses) divided by (sales price) = (capitalization rate)
GRM:
(sale price) divided by (potential gross income) = (gross rent multiplier)
plus
(gross rent multiplier) X (potential gross income) = (sales price) – Formula for deciding if the potential purchase is appropriate.
The rent collected from the invested property must be enough to pay the tax, the expenditure of repair as well as paying the debt. The 2-4 unit properties have a lower rate of risk of vacancy by tenants because if one tenant is gone there are others to cover the debt. In such case the income of the investor may be decreased for a short time until new tenant arrives. It is a wise decision to make arrangements of paying at least 3 month’s payment beforehand for an unfavorable period. Also these types of properties need routine maintenance and it is helpful to learn the basic rules of maintaining a property. It is often advised to hire an experienced person to manage the affairs of the investment for at least 1 year so that the first time owner can get ample learning time to cope with the new task. Once the investor gains some money in these 2-4 unit properties he usually sells out the property for investing larger income properties that produce more income or wait until the property is paid off for a better return. There are some other factors as well while selecting the property. The property should be located in good school districts so tenants with children will be interested in the property. Another favorable idea are income properties near the University of Texas (UT) campus area in Austin. They usually lack vacancy but normally need more repairs when transitioning to a new renter but a higher deposit helps cover the costs.
Pat Roberson at eRealty can assist you invest or sale your income real estate in Austin.
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