Tips for Getting Your First Rental Property
Thinking of getting started in real estate investing?
Real estate investing in all its forms has one goal – to increase income and wealth. There are a lot of benefits to investing in single-family residential (SFR) rental properties. Rental properties offer cash flow every month along with long-term benefits of increasing equity and appreciation.
Here are some tips to get your started.
First and foremost is assessing your finances. You need to know where you stand financially. Since most first-time investors can’t afford to pay cash, you’ll want to check if you qualify for a loan and how much. How much can you afford for a down payment? Also it’s vital to know your credit score. To secure a loan with a low interest rate, a good credit score and the ability to make a down payment will help.
Talk to a lender to find all this out before you go house hunting.
Create a Plan for Investing
Once you decide to invest in SFR rentals, figure out your investment criteria. What type of returns are you looking to generate? What minimal monthly cash flow are you looking for? How much repair work are you willing to do? How much can you afford to spend?
You don’t have to rush and get 10 properties in two years. Many investors start out slowly and get 1 property per year and grow from there as they get more experience. Consider buying a duplex, living in one unit and renting out the other. It’s a pretty safe way to gain experience and see if being a landlord is for you.
Determine the Right Area
Location is everything in real estate especially when you’re starting out. Usually the closer a rental property is to your current home, the better. It’ll make it easier for you to show the property to prospective tenants, make repairs when needed and in general keep tabs on the property.
You also want to identify an area where property values and rents are stable or preferably, increasing.
Find the Right Property
When it comes to identifying the right property for your first purchase, be patient! Seasoned investors often look at many properties before buying the one that meets their criteria. A lot of properties won’t.
Looking at a lot of properties will also force you to practice running the numbers to see if a property meets your investment criteria. You want to get really good at this to avoid mistakes and to quickly assess properties.
Plan your Management
Are you ready to be a landlord? It’s a great experience on your first deal, so you learn what’s involved. It can be a lot of work though, if you’re not an organized person. So, you may consider hiring a property manager right from the start or as your portfolio of rentals grows.
While there’s a lot involved in getting started, there are shortcuts you can take so you don’t have to learn it all the hard way. Get involved with local real estate investment organizations and/or find some online. A lot of experienced investors are willing to share there knowledge, which can save you a lot of time and headaches!