Do you want an investment that will serve as your retirement plan, expand your portfolio, and hedge against inflation? Then, consider investing in rental properties.
Rental property investment is a lucrative business when you know the hacks. It can help you accumulate wealth and earn more passive income. Rental property is one of the investments that guarantees investors steady returns for several years. Below are a few benefits of investing in your first rental property:
- You can use cash flow from the rental income to pay for your mortgage.
- You are sure of steady passive income that will be your financial security if needed.
- Your rental property can be a foundation for providing generational wealth.
- You can use the rental property for more funding for other investment opportunities.
- Your rental property investment appreciates over time.
- If you decide to sell the property in the future, you will earn more on your investment because you have added value to it.
All these are possible when you invest in your first rental property. However, it can be frustrating if you fail to do it properly. Some rental property owners only enjoy some of these benefits because they could not set up a suitable system. This article has compiled several tips for buying your first investment property.
6 Pro Tips for Buying Your First Rental Property
1. Do enough research
Before buying your first rental property, you need to perform extensive research. Take note of the various rental properties available (residential, commercial, single-family, multifamily, etc.). Note the pros and cons of investing in each of these properties.
Which property type will be suitable for your goals? Knowing the appropriate location for the property you want and the target renters is also necessary. Study your target market and their preferences. Know the price range of various property types at different locations. Do you intend to manage it yourself or use property managers?
Your answers to all these questions and considerations will depend on your goals of owning your first rental property. It is essential to note that investing in a property that doesn’t align with your goals can ruin your business.
2. Choose the right location
If your target market is young college students, you need a location close to a college campus. Landlords who want to invest in vacation rentals need to look for neighborhoods close to tourist attractions to have such patronage. Your rental property should be in a location that is closer to your target market.
Doing so helps boost the demand and value of your rental property. Consider locations that have prospects of becoming lucrative shortly. Your choice area should have basic amenities that your target renters will appreciate.
3. Prepare to be a landlord
Some landlords intend to manage the property themselves. In such cases, you will need to learn to be handy. Prepare to learn how to fix and handle some basic things around the property. We advise that landlords who want more passive income from their rental properties hire property managers.
Property managers will use their expertise, skills, and experience to ensure the smooth running of your rental while you enjoy the income without any stress.
4. Know your legal obligations
As a landlord, you have several obligations. Your responsibilities may vary depending on the location of your rental property. However, a general duty you should prepare to perform is making the rental property habitable to tenants. Study the landlord-tenant laws of the state and act accordingly to prevent liabilities. Know the legal requirements of the state before you invest. That is because you may need help adhering to some states’ regulations.
5. Know the expenses to expect
Some new landlords are surprised by the additional expenses they have to pay to keep the rental property running smoothly. Failure to plan for this can halt the progress of your investment. Don’t be taken unawares by additional costs. Prepare for marketing and adverts, maintenance and repairs, property management fees, taxes, etc.
6. Get a landlord’s insurance
Having landlord’s insurance will give you peace of mind after making this massive investment. Several things can go wrong with your rental property. Liability issues may arise, Bad tenants can vandalize your property, burglars can damage and steal from the rental, natural disasters can affect the structure, renters may fail to pay rent, etc. Your landlord’s insurance will shield you from all these occurrences and more.
When buying your first rental property, engage the services of real estate agents and property managers. These experts will guide you on the best property to purchase for a lucrative investment.
