Purchasing your first Theodore single-family rental property can be an intriguing experience. But as with all investments, there are certain risks involved. To guarantee that your first investment property purchase in Theodore becomes as money-making as you hope it will be, there are numerous things to be aware of before you purchase. For example, you’ll need the answers to questions like whom do you want to rent to? What type of rental property will you concentrate on? How will you finance your purchase? In what follows, we will review these inquiries and other imperative things you’ll need to understand to make purchasing your first rental property a rewarding experience.
Define Your End Goal
When buying your first single-family rental home, one of the first things to not forget is to set clearly defined end goals. Before you start your property search, you have to take some time to discover what qualities you are searching for in your investment property. For instance, you might be searching for properties in a particular area with a specific number of bedrooms or minimum square footage. You can also concentrate on an individual renter demographic, such as college students or retirees. Knowing the particulars allows you to refine your search criteria and locate potential properties quicker.
Prepare Your Finances
Alongside knowing what qualities you are searching for in a property, it is crucial to prepare financially before you buy an investment property. Industry experts recommend paying down personal debt and saving for a down payment before beginning your property search. Reduced personal debt can help you to qualify for more favorable loan rates, while nearly all mortgage loans for an investment property will require a 20% down payment. Organizing to finance in advance is another vital step, but pay attention to high-interest loans or mortgage products that seem too good to be true. By prequalifying with a trustworthy mortgage lender, you will be ready to embrace the investment opportunities as they show up. By prioritizing financial readiness, you can more unhesitatingly purchase that rental property when the opportunity arrives.
Crunch the Numbers
After taking these indispensable preliminary steps, the search for the right property starts. One critical factor to bear in mind during your search is that you must run a series of numbers on each potential property, like your margins, operating expenses, and expected return. This is where a lot of new investors make costly errors.
For new investors, don’t forget to include all the expenses related to purchasing and preparing the rental property for lease, as well as ongoing property management, maintenance, and vacancy costs. Industry experts suggest a margin of 10% and a 6% return in your first year means you have a profitable investment.
It is vital to bear in mind that an investment property is just that, an investment. Getting attached to a specific property or permitting emotions to drive your decisions is not a smart move. Additionally, the property you buy is not necessarily one you would ever live in yourself. Industry experts suggest purchasing low-cost properties in high-demand areas for your first investment. However, stay away from fixer-uppers unless you are a highly skilled home remodeling expert or know a quality contractor who will accomplish the job at a lesser than the going rate. Your first single-family rental property should be seen as the first step toward a long and profitable investment career rather than the end goal. In such a manner, you can keep yourself on track and your investment properties in the black.
Design a Management Strategy
Lastly, keep in that purchasing a rental property is just the first step. To guarantee your investment flourishes, you need a proactive management strategy. This is where hiring a Theodore property management company can help. As local market experts, property managers can help you locate off-market investment properties, analyze market conditions, set rental rates, and much more. As more seasoned investors will tell you, the right property management company is a helpful partner in profitable rental property investing.
Originally Published on March 13, 2020
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