Buying your first rental property is often a nerve-wracking experience. Fortunately, there are some tips that you can use to guide you along the process. Today, we are going to look at 10 tips that will help you in your quest for a rental property. Let’s get right in!
1. Conduct Thorough Research
Before you buy a rental home, you should always conduct extensive research. Here are just a few basic things to consider:
- The local market. Is it a buyer’s or seller’s market?
- Find the best schools and neighborhoods.
- Calculate the cost of cleaning services in the area.
2. Make Room For A Down Payment
Putting a large down payment on a home is an excellent investment into a new rental property. Look to have enough money saved to make a down payment of at least 35 percent on the home. This can potentially lower your mortgage and ensure you don’t pay PMI.
3. Calculate Your Return On Investment
Buying a rental property is a calculated risk, with the intentions of making money. To make the most money, you need to calculate your return on investment. Determine your total costs, including cost of buying the home, bills, maintenance, and others. From there, determine the amount of money that you want to make.
4. Look For A Single Family Home
If you are investing in your first rental property, we recommend you look into a single-family home. These properties are typically less expensive and easier to maintain as compared to larger homes. Additionally, fewer tenants will be living in the home, making it less likely that any damage will be done to your property.
5. Invest In A Turnkey Property
Investing in properties is expensive; whenever you buy your first rental property, look for a home that is immediately ready for clients. Fixer Upper homes can often be large risks, costing thousands before they are presentable. By purchasing a turnkey home, you can begin making income quickly, without the added worry of costly repairs.
6. Buy For Location
Rental property investors often cater to two groups: vacationers and local renters. Whichever group you seek to serve, make sure your house is in an ideal location. Appealing to vacationers? Try buying a property in close proximity to local attractions. Looking to rent out to local residents? Try to find houses in good neighborhoods, near schools, and close to the largest job hubs.
7. Focus On The Details
It’s great if a rental property has all of the fixtures and upgrades, but you should always be aware of home details. What does this mean? It means you must be checking that the septic, HVAC, plumbing, and other systems work. Additionally, it means keeping a keen eye out for any leaks or mold. If you buy a house with any of these problems, it will be expensive to fix.
8. Know Your Budget
It happens all too often, aspiring rental property owners will overpay for a home. Whenever this happens, it becomes difficult to turn a profit. We recommend setting a budget before you invest in a home. This will keep you disciplined, rather than buying the first house that you see.
9. Find The Right Realtor
Finding the right realtor to facilitate the buying process is a crucial step towards obtaining a rental home. Real-estate agents should be immersed in the local home market, meaning they will have extensive knowledge of the best properties to invest in. We recommend holding a meeting with at least three agents to find the one best suited to your needs.
10. Consider Life Tenancy Investments
A life tenancy investment is a potential way to invest in properties. Be aware, however, it does come with risk. In a life tenancy agreement, an investor purchases a property for a relatively cheap price then waits for at least a decade before renting or re-selling.
There you have it, 10 tips for buying your first rental property. Use these strategies to purchase an amazing rental home that will bring in high-profit margins.