It can be exciting to buy your first Tillmans Corner single-family rental property. But, just like all investments, there are some risks. There are a lot of things you need to know before you purchase your first investment property in Tillmans Corner to make sure it works out as you hope it will. For example, you’ll need to know the answers to questions like, “Who do you intend to rent to?” Which type of rental property will you target? How will you finance your purchase? In the next section, we’ll talk about these questions and other important things you need to know before you buy your first rental property.
Define Your End Goal
When you buy your first single-family rental home, one of the most important things to remember is to set clearly defined end goals. Before you start your property search, devote some time to knowing what features you are looking for in your investment property. For example, you might be looking for properties in a certain area with a specific number of bedrooms or a minimum number of square feet. You can also target a particular renter demographic, like college students or older people. If you know the details, you can narrow down your search criteria and locate potential properties faster.
Prepare Your Finances
Before you purchase an investment property, you should not only know what you want in a property, but also it is important to prepare financially. Experts in the field say you should pay down your personal debt and save for a down payment before starting your property search. If you have less personal debt, you may be able to get better loan rates, while nearly all mortgage loans for an investment property will call for a 20% down payment. Setting up financing ahead of time is another critical phase, but watch out for high-interest loans or mortgage products that seem a little too good to be true. By getting prequalified for a mortgage with a trusted lender, you will be ready to take advantage of investment opportunities when they come up. If you put your finances first, you can buy that rental property with more confidence when the time comes.
Crunch the Numbers
Now that you’ve taken these important first steps, you can start the search for the right property. During your search, it’s important to remember that you should run a series of numbers on each potential property. These numbers should include your margins, operating expenses, and expected return. Many new investors make big mistakes in this area.
New investors sometimes forget to add in every expense of purchasing and preparing the rental property for lease, as well as the ongoing cost of property management, care, and vacancy. Experts in the field say that a margin goal of 10% and a 6% return in your first year is a profitable investment.
It is vital to remember that an investment property is just that, an investment. Getting devoted to a particular property or allowing emotions to guide your actions is not a smart idea. Plus, the property you buy is not essentially the one that you would ever live in yourself. For your first investment, an industry specialist recommends opting for low-cost properties in high-demand areas. However, avoid fixer-uppers unless you are a highly skilled home remodeling expert or know a trusted contractor who will do the work for less than the going rate. Your first single-family rental property should be regarded as the first step toward a long and profitable investment career rather than the end goal. In this fashion, you can keep yourself on track and your investment properties in the black.
Design a Management Strategy
Lastly, bear in mind that buying a rental property is just the first step. You need a strategic management plan in place to make sure that your investment pays off. This is where hiring a great property management company can assist. As local market experts, property managers can help you discover off-market investment properties, study market conditions, set rental rates, and much more. In fact, as more knowledgeable investors will tell you, the right property management company is one of the most important partners in profitable rental property investing.
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