Your Guide to Buying and Managing Your First Rental Property
An article from Guest Author Ron Kane– WinterizeGuys.com
Whether you’re thinking of investing in your first vacation home, condo, single-family house, or a multi-unit property like a duplex or townhome, there are several things you’ll need to take into consideration before making a purchase. For instance, you’ll need to think about how you’re going to finance the property, manage your tenants, keep the rental home safe and secure, and handle repair and maintenance issues. Additionally, you’ll need to determine whether a condo, single-family home, or multi-unit property will be the best investment for you.
To learn more about these considerations and the various steps you’ll need to take to purchase your first investment property, read on!
Things to Consider
Before purchasing an investment property, you’ll first need to determine if you’re up for the task of managing and maintaining the property on your own—or whether you’ll hire a property manager and/or contractor to assist you. You’ll save money if you manage and maintain the rental unit on your own, but the benefits of sharing your long list of responsibilities with another professional will often be worth the added cost.
You’ll need to determine whether a condo, single-family home, or multi-unit property will be best for you. A condo or single-family home is the most affordable option for beginner investors, but keep in mind that a multi-unit property will generate more in rental income each month.
It’s also important to think about how you’re going to pay for your rental property. Unless you’re purchasing the property in cash, you’ll need to secure financing and have enough money saved for a down payment. According to LendingTree, most lenders require a minimum down payment of between 15 and 20 percent for investment properties, but specific requirements will vary depending on your credit score, debt-to-income ratio, household income, and whether you’ll be occupying the property before renting it out.
Pursuing a rental property business can be very rewarding and lucrative, but it’s no small task. A critical step in the process is getting the legal element of it taken care of, and that involves setting up a legal business entity. If you’re new to the process, there’s a lot to understand, such as state requirements and differences between entity types. As you conduct your research, you may decide that setting up an LLC, which is what many rental property owners do, is the best structure for your business.
Find the Right Investment Property
After you’ve taken the above factors into consideration, you’ll need to hire a good real estate agent to assist you in finding an investment property. Your real estate agent can also help you to find a trusted appraiser, home inspector, and mortgage lender. If you’re planning on hiring a property manager, your agent may also be able to offer some local recommendations.
When searching for an investment property, it’s also important to look for rental homes in high-demand areas that are likely to attract reliable renters or vacationers. Experts at Coach Carson recommend purchasing an investment property in an area where the following are present:
● Economic stability
● Population growth
● Low crime rates
● Public transportation
● Restaurants, shopping, parks, and microbreweries
When you find a property that you’d like to invest in, your real estate agent will help you to make an offer, negotiate with the seller, and schedule the inspection and appraisal. The process of buying an investment property can be complicated, but your real estate agent will answer any questions you may have.
Protect Your Investment
Once you’ve purchased your first investment property, you’ll need to decide how you’re going to manage, maintain, and protect your new rental home. Depending on your budget, installing an alarm system could be your best strategy for warding off intruders. You can expect costs to increase if you choose to connect your alarm system to a monitoring service.
If you’re looking to protect your investment without spending hundreds of dollars on an alarm system, you may choose to install a DIY smart security system in the home or surround the property with motion-detecting lights. However, you’ll protect your investment even further if you plant thorny bushes and shrubs around the property and purchase unbreakable glass for the windows. Typically, combining several types of home security will be best for protecting your investment from burglars and vandals.
After you’ve taken effective security measures to protect your investment, you can finally focus on managing and maintaining your first rental property.
A successful real estate investor isn’t born overnight, but in no time at all, you’ll be generating income and making your investment property a great place to live.