Doing anything for the first time can be stressful, and where there is money involved, the stakes are even higher. Buying one’s first rental home is definitely up there with some of the most stressful decisions one can ever make. It is essentially spending money gambling on a property for returns on the future. With proper planning though, investment in rental property should not be too much to handle. Here are some clever tips for the beginner;
Advice vs. Research
First timers should not get into any business without help. It is okay to seek advice from other experienced investors, especially those that have been investing in the same area for years. However, it is important to remember that every investment journey is unique. With this in mind, do as much research as possible. Read books, case studies and go to seminars in order to gain enough confidence to make those difficult decisions. Success in the real estate business will ultimately be based on the amount of due diligence done. This is why the first rental property bought will likely be successful when it is done in one’s locality or area of residence. Investing in rental property is more than just the property itself. It requires an understanding of just how the local economy will support the decisions made today going into the future, the major employers and what the major attractions for moving into the area are. This is why property rental history is such an important aspect of the process.
Real estate agents
In the same vein, real estate agents are great, as they likely will give investors access to properties being foreclosed and get them a good deal. Still, one must remember that every other investment competitor will likely be using the same avenues to gain access to these properties. This competition will likely result in the cost of the acquisition going up. Make an exception and do some self-marketing. Find motivated sellers without the pressure of competition. This will improve the chances of getting a good deal. Another clever idea is to work with real estate wholesalers.
To reduce uncertainty, it is important to understand the rental picture of the property one is looking to invest in. Go to the classifieds and check out properties similar to the one earmarked for investment. With this information, look up the rental situation. Small details might prove helpful to the overall decision. For instance, if the landlords are offering many incentives like free months, then this is likely an indication of a very competitive market that should be avoided. Drive around and do some leg work or call the landlords, but make sure before taking the plunge that a conservative value that can be expected for the rent is clearly set.
The money matters must also be clearly understood. Know all the important cost considerations, from the mortgage to the much simpler ones like repairs and maintenance. In most cases, a deposit is required, so have that handy. Understand all the cost implications like taxes and insurance.