Buying your very first rental property can be the most inspiring event in your life. Yet, like other investments, it comes with many challenges, and risks are included. So, if you want your first investment property purchase to be as profitable you need to consider some important factors before you buy. By navigating the purchase journey with tried and tested methods, you will be successful with your first rental real estate purchase.
One of the most important things to remember when buying your rental property is to establish clearly defined end goals. Before you continue your property search, you should take the time to understand exactly what features you’re looking for in your investment property. For example, you might be searching for properties in a certain area, with a specific number of bedrooms, or minimum square footage. By establishing the essential criteria, you can refine your search criteria and locate potential properties faster.
Buying Your First Rental Property – Understanding The Requirements.
In addition to establishing the features you desire in your investment property, it is also important to prepare yourself financially to purchase the property. As a matter of good advice, you must first settle all of your debt before diving in. Most experts suggest you begin saving for a down payment in advance, before starting your property search. Reduced personal debt goes a long way in meeting the essential requirements for a home loan. Such as a 20% down payment. More importantly, low personal debt can also help to secure more favorable loan rates.
Getting financing ahead of time is an important goal, but at the same time, it pays to be wary of super-friendly loans and mortgage products that seem too good to be true. Sometimes, inexperienced first-time buyers will rush into securing that By pre-qualifying with a reputable mortgage lender, you will be ready to seize the investment opportunity as it arises. And by securing financial preparedness, you will also be more confident in commencing the search for your intended rental property.
Buying Your First Rental Property – The Needs For Comps.
Once you have researched and established the end goals and secured your finances, the hunt for the right property can begin. The start point of any search is running comps – a series of comparisons on each prospective property on your list. The common parameters include margins, operating expenses, and expected returns. As important as they are, this is the part where new investors can often end up making serious mistakes. Be it a lack of experience, or the sheer excitement of owning your first rental property, rushing into the purchase can result in an ill-informed and expensive adventure.
In their rush, new investors can often trip up on another aspect of owning an investment rental property. In addition to the cost of buying the property, buyers fail to take into account all of the expenses related to preparing the rental property for lease. These include property management, routine property maintenance, and unexpected vacancy costs. Industry experts agree that a target margin of 10% and a 6% return in your first year indicate a profitable investment.
Buying Your First Rental Property – Is First And Foremost An Investment.
At the end of the day, it is worth keeping in mind that an investment property is first and foremost – an investment. Also, the property you buy is not necessarily a property that you will ever live in yourself. So, for your first investment, industry experts recommend opting for low-cost properties in high-demand areas. But avoid fixer-uppers, unless you are a trained and skilled home remodeling professional or know a quality contractor who can do the work for less than the going rate.
Your first single-family rental property should be seen as the first success towards a long and profitable investment career, not the endpoint in itself. In this case, you need to keep track of yourself and keep your investment properties in black. Being attached to a particular property or allowing emotions to guide your decisions can often cloud your judgment, leading to errors.
How We Can Help?
Whether you need help searching for your first rental property or the right property management company to handle it, Real Property Management Premier can help. Our experienced team
Contact Real Property Management Premier at 954-362-5235 today.
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