Top 10 Tips for Buying Your First Rental Property
Have concerns about buying your first rental property?? Need some proven tips and strategies?? Welcome, aboard!! You have set your foot on the right page. In this article, you will get to know the things to consider and inquire, before buying your rental property.
Buying an investment property in real estate avenue can be a fruitful way to produce passive income and also tends to be lucrative in the long-run. There are several ways to invest and gain exposure to the asset class in real estate avenue, and that's what makes it an exciting investment option. However, there are many vital factors we should consider before owning a rental property. So, let us get started and walk through tips we need to follow before buying our first rental property.
Are You Ready To Be A Landlord?
The first and foremost thing is to introspect and question yourself, "Am I ready for this?". It is so because you will have an added responsibility from now on. Managing the finances, picking the right tenants, renovating or repairing whenever required, etc. requires time and attention. If you are already a busy bee and can't dedicate time to these things, you might also hire a property manager. But paying them will eat away your profits. So, take into account all these things and make the right decision.
Manage Your Personal Finances:
Many renowned investors opt for debt as a part of their portfolio investment. But, it is not a recommendable strategy to a beginner or an average-earning person who has other loans. This is because if you are already struggling to pay other loans and bills, don't hassle yourself by taking up another loan. This investment will not always result in profits. Issues like Vacancies, market downturns, etc. are unpredictable. So, always be within safe boundaries.
Pick The Right Location:
Location is a crucial factor that plays a key role in your investment returns. If your property location is situated in IT hubs, has good amenities (like stores, malls, theatres, etc.), and if it is a good residential area, and has some reputed schools and institutions, then pat your back! You've picked up the right location and paved a way to the potential renters. Also, make sure that the locale has lower property taxes do not have to be emptied.
Determine Your Property Expenses:
Although all the rental property returns are different, they have one common thing, i.e. additional expenses. As a landlord, you need to know all the costs that you might have to afford in the future. For example, consider the property taxes. As already discussed earlier, every location has different tax pricing depending upon the demand of that location. Also, be prepared for all the unexpected renovations and repairs, better if you maintain a contingency reserve to fund them.
Invest In Low-Cost Homes:
The simplest and most secure way to get started as a landlord is by investing in a single-family home first. It is so the maintenance is far way easier when compared to high-cost homes or multifamily properties. With only a single-tenant, you can manage both the property and the tenant easily. You don't have to distress yourself about many things, and this will give you experience as a landlord and aid you in your future investments (in rental properties).
Invest In Landlord Insurance:
It would be best if you always had a backup/shield for your new investment. So, along with homeowners' insurance, also consider having landlord insurance. This insurance covers property damage, lost rental income, and liability protection ; in case if there are any. This might be an added expense, but you can also lower your costs by investigating whether an insurance provider will let you bundle landlord insurance with a homeowner's insurance policy.
Avoid Buying a Fixer-Upper:
We are all highly accustomed to buying a thing from a seller who offers it for a lower price. In the same way, it might be so tempting to look for the house that you can get at a bargain. However, if this is your first property, then it is probably not a suggestible idea unless you're skilled at improving large-scale homes and likely willing to pay too much to renovate. So, better look for a home that is priced below the market and needs only minor repairs.
Weigh The Risks:
Always remember that the location of the asset you invest in should have a high-rental demand. It is so because you will still have your rental income even during the time of economic downturns. That's why savvy investors understand the uniqueness of choosing the right rental property to balance out their risks.
Speak To Other Landlords:
Start your journey as a Landlord by seeking advice from other Landlords. Talking to a mentor who can guide you through the process will have a positive impact on you. When you speak with other landlords, you must keep their own experiences, purchasing strategy, end goals, etc. in mind.
Screening Of Tenants Is A Must:
Having potential tenants is predominantly an excellent start to your journey as a Landlord. So perform due-diligence on tenants thoroughly and, if possible, also try to inquire about their previous stays and credit histories.
Never skip this step even if they are your acquaintance/associates.
Keeping these strategies in mind, make a proper portfolio. Remember to inquire about your neighborhood and the price of some similar properties before making an offer. Check out Assetmonk, a top-notch investing platform in Hyderabad. Its curated properties and stringent due-diligence process helps in risk mitigation and ensures hassle-free investment.
Hope these pro tips might be helpful for you to avoid some costly mistakes.