Learn the Trade
Before you can start searching for your first investment property, it’s crucial to understand as much as you can about rental property investing from those already doing it. Familiarize yourself not just with the process of buying and owning rental properties – and all that implies – but also with the best practices of successful investors.
You can also begin by understanding 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 impression to read about landlord/tenant laws too. Learning so much as you can about every single aspect of purchasing and owning rental real estate is the key to successfully making your first investment.
Prepare Your Finances
Alongside learning the trade, it’s additionally vital to prepare yourself financially before you purchase a rental property. If you plan to finance your investment with a mortgage, you should first 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 a good idea to pick 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 ready to start searching for your first investment property, there are a few key calculations you will need to use to assess each one. Buying an investment property isn’t like buying a personal residence or even a vacation home: it’s important not to let emotion impact your choice of property. Instead, evaluate potential properties based on things like your expected return on investment (ROI), profit margin, and operating expenses.
Be careful to account for all expenses, including taxes, landlord insurance, repairs, and improvements. You’ll likewise want to do a detailed rental market analysis for each potential property to determine your expected rental rate and the strength of local demand.
Choose a Strategy
Finally, it’s important to note 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 good idea to choose an investing niche that is beginner-friendly. For example, unless you are a contractor or handyman, it’s best to avoid fixer-upper properties for your first investment.
Also, it’s a wonderful idea to aim for a lower-cost home your first time through the process. A lower-cost rental home can help you live through the full investment process while decreasing the overall risk of your investment. This makes it a great starting point for new investors.
Getting started in rental real estate investing can be both motivating and a bit overwhelming – there’s a lot to learn both before, during, and after buying your first investment property. Therefore, one of the best actions you can do is have an expert Evansville property manager on your side. At Real Property Management Results, we work with rental property investors to find and assess prospective rental properties. Contact us today at 812-461-16766 to learn more.