Agents who either invest themselves or assist other investors may be aware of important factors, such as how rental income plays into a purchase price, and can assist you in purchasing a better property. While you may get lucky and find something wonderful just by knocking on doors, the hot real estate market of the past five years means plenty of novice investors have jumped in, bidding up prices for rental properties. It's too easy to overpay if you don't know what you're doing. A good agent can be invaluable in this instance. Finally, when it comes to finances, many first-time investors are surprised to find out it may cost them more to buy their property than they expected.
Interest rates are at least a half of a percentage point higher than for owner-occupied residences.
Your loan may also have a shorter term, a variable interest rate, higher fees, and a prepayment penalty. Also, you'll be required to put more down on the property than if you were buying something you expected to live in. The appraisal is more expensive, since appraisers must find out what other renters pay for comparable units in the neighborhood. If you hope to finance your purchase based on the rent you expect will come in, be prepared to show the lender a signed lease. Without a signed lease, you'll have a hard time proving what kind of rent the unit will generate.