Learn the Trade
Before buying your first investment property, you need to understand everything you can about rental property investing from those already doing it. Get yourself acquainted not only with the process of buying and owning rental properties – and all that includes – but also with the best practices of successful investors.
You can also start by browsing some of the top books for people new to real estate investing. Attend area meetings with business leaders and get to know a local landlord or two; it might be a good idea to read about landlord/tenant laws too. Learning as much as you can about every aspect of buying and owning rental real estate is the key to successfully making your first investment.
Prepare Your Finances
Apart from learning the trade, it’s also imperative to prepare yourself financially before getting a rental property. If you want to finance your investment with a mortgage, you need first to get your finances in good shape. Optimize your credit score, pay down debt, and have at least a 20% down payment plus closing costs saved up before your first purchase.
Bidding on investment properties can be very competitive, so it’s also advisable to find a lender and get pre-qualified before you make any offers. Doing so will increase your chances of getting the best deal on your first rental property.
Crunch the Numbers
Once you are available to begin searching for your first investment property, there are some essential calculations you will have to utilize to assess each one. Getting an investment property isn’t like buying a personal residence or even a vacation home: it’s imperative not to let emotion impact your choice of property. As an alternative, evaluate potential properties based on things like your expected return on investment (ROI), profit margin, and operating expenses.
Don’t forget to account for all expenses, such as taxes, landlord insurance, repairs, and improvements. You’ll also need to undertake a comprehensive rental market analysis for each potential property to evaluate your expected rental rate and the strength of local demand.
Choose a Strategy
Lastly, it’s crucial to remember that there are several different investment strategies for owning rental properties. Not only should you learn as much as you can about these strategies, but for your first investment, it’s a smart strategy to choose an investing niche that is beginner-friendly. For illustration, unless you are a contractor or handyman, it is a good idea to avoid fixer-upper properties for your first investment.
In addition, it’s advisable to aim for a lower-cost home your first time through the transaction. A lower-cost rental home may allow you experience the full investment process while decreasing the overall risk of your investment. This makes it an ideal starting point for new investors.
Getting started in rental real estate investing can be both thrilling and a bit stressful – there’s a lot to learn both before, during, and after buying your first investment property. Due to this, one of the ideal things you can do is have an expert Sanford property manager on your side. At Real Property Management Vanguard, we engage with rental property investors to locate and assess prospective rental properties. Contact us today at 407-681-7802 to learn more.