Five Signs It’s Time to Buy Your Second Investment Property

By : europeanproperty

Think you’re ready to take the plunge and buy a second property?  

It’s no secret that investors love putting money into real estate. Apartment, houses, commercial spaces—there’s a range of properties available depending on how much you want to invest and what your end goal is. Some might want to rent it out long term, others might want to spruce it up and flip it for a profit.

It’s common for investors to own a single property, but what many don’t realize is that investing in a second property isn’t out of their reach. Buying real estate is always a big event given the money involved, the paperwork, and the mortgages you may have to take out. But consider that owning two properties gives you double the chance to increase your money if you’re smart about it.

If you’ve got your first investment property and are thinking about a second property, here are five signs you’re ready to take the plunge.

Your first property paid off

Is the investment in the first property paying off? Are you making more than you put into the property or are you making a loss? Investing in real estate isn’t as easy as it sounds, and things can go belly up very quickly. The process requires diligence, skill, foresight and knowledge.

Look at your first investment objectively. Even if it is doing well, take stock of how you feel about it. Are you confident about having the skills needed to pick a second property? Are you still finding your feet when it comes to property management? Do you think you got lucky with a good real estate agent the first time around? What does the property market in your neighborhood or city look like for the next year or two?

Remember that two properties is double the work, so make sure you’re up to the task.

You own equity in the first property

If you’ve got a nice amount of equity building for a few years in the first property, it might be a good time to consider a second one. Find the right mortgage broker and you could use that equity as a down payment on another property and potentially increase your income in the long run. The bank might require you to keep between 10-20% equity in the first home, so you may need to own 30-40% of the home for this to work.

Your income and savings have gone up

If you’ve been in the investment game for a while and are a mid-career or senior professional, chances are you’ve seen your income and savings steadily rise over the years. Why let that money just sit in your bank account? Put it to work.

We’re not suggesting that you throw it at the first property you see, but if you have some money to spare, a second investment property is a good idea. Your savings give you the ability to deal with any real estate-related headwinds—like higher mortgage rates or property taxes—that may come up in the future and even if your rental income doesn’t cover the mortgage repayments you can make up the difference and still be in the green.

Low mortgage rates

One of the most important things to keep in mind when considering a second investment property is the cost of borrowing. Some investors might be able to afford to buy properties with their own money, but for many taking out a loan is inevitable. Don’t let that scare you. If you’re smart about it and make a move at the right time, you could enjoy low mortgage rates that make buying another property affordable. Ensure you check all your finances and are prepared to handle higher repayment amounts if the rates are hiked.

Retirement calling

The whole point of investing is to build a nice nest egg, How you use that accumulated wealth depends on what stage of life you’re at. For some, the money will go towards their children’s college education, for others it could go into their retirement fund. No one wants to live off just their pension. It’s never too early to start putting away funds for your golden years.

If you’re thinking of retiring soon, are close to the retirement age, or are planning for your longer term future, think about putting some money into another property so you can add to your overall wealth. If you manage to pay off the mortgage while you’re still working, you could enjoy your retirement years blissfully on a beach while earning debt-free income from your properties.