There’s an obvious reason why it’s called “investment property,” and it has plenty to do with how it can be a lucrative way to invest your money. It’s a simple enough premise — you buy a property with the objective of making money out of it, either as a long-term or short-term rental. It’s an investment that will not only pay for itself in time but may even come with great profit potential, making it a truly compelling and shrewd financial move.

Of course, there’s still a considerable measure of hard work required to achieve exactly this. The important thing is, when it comes to an investment property, you’ll definitely want to do it right from start to finish, so you ultimately reap the payoffs that were promised. Let’s take a look at the most important steps you’ll need to take.

Zero in on the Right Location

Most real estate professionals can be downright obsessive about one very important factor in the property buying process, and that is location. For many, this can, in fact, make or break the sale of a property — or apropos to investment properties, be the biggest determinant in just how well it does as a rental. This is because renters will almost always err on the side of convenience, so they’re bound to go for a rental that’s close to schools, public transportation, establishments like restaurants, and more.

Case in point, in Kansas City, you can’t go wrong with the Overland Park and Leawood areas, which are not only within excellent school districts but also have great outdoor spaces, which inevitably make them more compelling neighborhoods for families. For the younger and hipper set, however, Brookside and River Market will undoubtedly be more ideal with their bevies of trendy establishments and proximity to tech startups.

It goes without saying that it will serve you well, indeed, to really put a premium on location when you buy your investment property. At the same time, you’ll also want to determine the kind of rental property you want to run and the tenants you want in the house.

Hit the Ground Running with Improvements

Assuming you’ve already acquired your property and already have a better idea of the kind of rental that you want to put out there, you can now work on improving it accordingly. If you’re lucky, you may end up with a property that will require little more than surface improvements, so you can focus on achieving the aesthetics that you had in mind and adding in features that will make it more compelling as a rental.

In some cases, more work may be required to get your property rental-ready. For instance, a property that has poor air quality is definitely not something that you want to rent out just yet as this can cause respiratory problems and other health issues, which you certainly don’t want your tenants or guests to acquire. In this situation, you’ll want this problem addressed by getting a central air cleaner installed to remove pollutants and allergens and keep indoor air clean, which will set you back between $506 and $3,660.

Don’t Go It Alone for Maximum Profit

Finally, know that the work is nowhere near done, even when the property is ready to rent. You will still need to get the word out on the property, which will entail listing it in the right places and even marketing it heavily, especially if it’s located in a competitive area. Moreover, you’ll have to vet tenants, manage maintenance, arrange cleaning (for short-term rentals), stay on top of utilities, do the books, and so much more.

It’s a lot of work, yes, but it’s work that can be delegated to property management pros who know all the ins and outs of running successful rental properties. No doubt, this is a really feasible option if you want to take no chances and/or you simply don’t have the bandwidth to manage the property yourself.

Ultimately, the success of your investment hinges heavily on the decisions you make, as well as the steps you take to support those decisions. And with the ROI potential being as substantial as it is, you definitely won’t lack for motivation.

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Once you qualify for a home improvement loan, you may feel like the hard work is behind you. Securing financing is a big deal, but you still have a few decisions left to make before you start work. While several areas in your home could benefit from repairs, remodeling, or just a facelift, some projects will be a better investment than others. If you recently took out a personal loan for a home improvement project, be sure to review these top five areas to focus your money. Whether you plan to live in your home for years to come or you’re selling soon, here are some projects with an excellent return on investment (ROI).

Head to the Attic

One of the first things homeowners do when they receive a home improvement loan is to start mapping out big, expensive projects that will drastically transform their home, like adding a master suite or putting in a new kitchen. You may have room in your budget for a large renovation or two, but some smaller improvement tasks can prove just as valuable. Adding attic insulation is a relatively affordable project that can pay for itself in just a few years in heating and cooling costs. Depending on your home’s size, it may only take you a day or two to insulate your attic, but you’ll reap the financial benefits for years. Compared to monster projects that may not earn back their cost, insulating your home is a simple fix with one of the best ROI’s available.

Get a Grip on Your Garage

Before you consider transforming your garage into a family room, game room, or extra office, take a look at your home and ask whether it’s possible to find that extra space without sacrificing your garage. A guest room is great, but most buyers will prefer a place to park their car. Instead of making permanent changes, you might also consider making the space a dual-purpose area for home projects, game nights, or storage without losing one of your home’s valuable features. Here are a few tips to create a comfortable multi-purpose space in your garage: 

• Upgrade the flooring with tiles or a fresh coat of paint 
• Add customized shelving or cabinets to store tools, games, or seasonal decoration neatly 
• Make sure it’s well-insulated, and add additional insulation if necessary install a versatile carriage door

Follow the Rules for Basements

Many people look at their unfinished basements and see an opportunity. Turning your basement into a guest suite or second living area may be a good use of your home improvement loan funds, but follow the rules to avoid a costly headache.

Consult with a professional to make sure you follow local building codes for adding a bedroom or a second bath. Municipalities have their own rules for what needs to be done, including how to adjust heating and cooling systems. Whatever you do, speak with a realtor before you describe your basement as a living space. Basement areas may not always add to the total square footage of your home, and added bedrooms still need to follow guidelines to be considered in the room count.

Be Smart About Roofs

One of the first things homebuyers ask about when looking at a home is “how old is the roof?” Not only is having a solid roof vital for keeping the attic and living space safe, dry, and secure, but roof condition will affect your insurance costs. Homeowners insurance agents will often base their premiums on your roof’s age and condition. If you’re looking to upgrade your roof, do a good amount of research on the following areas: 

• Roofing materials  
• Styles 
• Warranties

Roofs have come a long way since the standard shingle, so weigh the benefits of materials like steel with their cost. Invest in a quality roof, but be realistic – if you’re planning to sell, the top-tier product with a lifetime guarantee may not be your best value.

Spring for That Second (or Third) Bathroom

Unless you live in a small apartment, most people want a home with more than one bathroom. Even older farmhouses and tiny efficiency homes have a half bath stashed somewhere (often in a converted closet). Remember that a bathroom project doesn’t have to be a luxury investment. You can keep the tile and clawfoot tub for the master bath and stick with standard fixtures for your guest bath. But don’t hesitate to add a second bathroom to your home. The chances are very high that you will get that money back (and then some) when you sell the house.

Whether you choose to stay in your home for decades or are hoping to flip it for profit, invest in your home wisely. Don’t be afraid to consult with both a contractor and a real estate professional. Both can give you the truth about what sells and how much value any improvement will bring to the worth of your home.

Avoid an On-Trend Kitchen

It’s worth considering the investment to give an outdated kitchen a facelift and upgrade cheap materials to those that will stand the test of time. Open kitchens with good lighting, ample storage and modern appliances often contribute meaningfully to a home’s value. However, you should steer clear of designs and materials that are very trendy, as they may date the kitchen down the line. Décor choices that limit a future owner’s ability to personalize the theme may cause more challenges in the future versus sticking with classic looks that appeal to everyone. Pinterest is a big source of inspiration for home renovations with all the trendy kitchens; it makes you want to have it and now that your loan is secured you can.

Let’s Not Forget the Windows

Sometimes we overlook the windows and forget they play a big part on our home energy efficiency. There are many reasons why you should replace your windows, a big one is having in mind that the cooling or heating system could be overworking itself because of one old window which can increase the bill, then there’s rain that will most likely leak and that can come with a waterfall of problems.

This is a guest post from Linsey Knerl, a personal finance expert, author, public speaker, and member of the ASJA. She writes for Upstart and has a passion for helping consumers and small business owners do more with their resources through awareness of the latest financial services.   

Shopping for a home is exciting. But before you decide between two and three bedrooms, or fall in love with the perfect backyard, you’ll need to decide how to finance your home and how much house you can afford. 

A mortgage pre-approval is a great place to start and can help you set your budget, compare options, and simplify the mortgage application process. With a pre-approval in hand, you’ll also be able to signal to sellers that you’re a serious buyer.

This guide will explain the pros and cons of mortgage pre-approval and how to get pre-approved for a home loan.

What is mortgage pre-approval?

Mortgage pre-approval is an indication of the loan amount and rate a lender could offer you for a mortgage if you submit a full application. Primarily, it acts as a guide to help you limit your search to homes you can afford.

When you apply for a mortgage pre-approval, the lender will run a credit check and review your income, debts, and assets. This will determine how much of a mortgage you can afford and at what interest rate.

Pre-approval isn’t required, but it has become standard practice in the home buying process. It can:

• Help you shop around and find the best lender, rates, and terms.    
• Open the door to working with agents who require potential buyers to have a pre-approval. It shows you’re ready to make an offer when the right opportunity arises. 
• A pre-approval also can help you get the home you want in a competitive market, showing sellers you’re ready and able to buy.

What’s the difference between mortgage pre-approval and prequalification?

Though similar, mortgage pre-approval and mortgage prequalification are not the same thing.

• A pre-approval is a formalized document that shows a lender has reviewed your finances with an official credit check and determined the mortgage amount for which you’d qualify.
• A prequalification is a bit more general and is often the product of a quick financial review, not a thorough credit check or financial analysis. There’s no hard credit inquiry, and you won’t have to complete a full mortgage application.  

If you’re serious about buying a house in the next 60 to 90 days, a pre-approval is your best choice. If you’re casually comparing mortgage options, a prequalification is a good starting place. But the prequalification won’t be as reliable as your pre-approval or as useful with agents and sellers. 

How to get pre-approved for a mortgage

You can apply for a mortgage pre-approval with any lender that offers a mortgage product, including banks, credit unions, and online mortgage lenders. Some online lenders will require you to complete the pre-approval or full loan application process at a local branch or over the phone.

Regardless of how you apply or what type of lender you work with, you’ll typically be expected to complete a full application and provide certain documentation (listed below). 

Once submitted, the application will go through an underwriter (i.e. software or a person who manually determines your creditworthiness), and the lender will determine your eligibility, terms, and rates. 

Finally, you’ll receive an official mortgage pre-approval letter that you can use to guide your search and show to agents. Typically, this includes:

• The loan type.
• The loan amount and purchase price you’re eligible for.
• Interest rates.
• Loan terms.
• When the pre-approval expires. 

The pre-approval letter will also include information about conditional factors that can impact your approval, such as job loss, an increase in outstanding debt, or a low appraisal on the home. 

See the full article here: Mortgage Pre-Approval