There are numerous examples of investors who have managed to build a successful and profitable property empire over the long term and like all property investors, there is always a first time.
Starting out in real estate investment can seem daunting and even stressful and the prospect of owning a portfolio of properties seems a long way away, but budding investors can soon get the hang of things and enjoy the fruits of their first rental property.
Planning is crucial
Owning a rental property can be considered a good long-term wealth-building strategy and a rental property can provide you with some monthly cash flow and also deliver a return on your investment when property prices rise.
All of this takes planning and simply buying a property and then deciding to rent it will not often be a good recipe for success.
Your planning should be based on what sort of target market you are wanting to attract with your rental property, such as a family or single occupants. It is also important to do your research and look at which location and price-range would best suit your requirements.
See if the numbers will work
It is a good idea to get talking with a few local property managers if you can so that you can get an idea of what will rent and how much average rents are.
Carry out your own research and look at what a typical property is renting for and try to gauge how much demand there is and how quickly these properties are being taken off the market having found a suitable tenant.
Sort out your finances
The type of financing you have in place to be able to buy your rental property will make a big difference and is an area where a number of novice investors tend to make some mistakes.
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A lot of investment loan programs require that you have somewhere between a 20% and 30% deposit in cash to put down and not only do you need enough cash in the bank to meet this requirement, you should also have some spare funds available other costs including any maintenance to the property.
You should always be mindful of the fact that the higher your amount borrowed on a mortgage to buy the property, the less residual amount you will have from the rent after you have made the finance payment.
It is never a good idea to leave yourself really short of funds and stretch yourself to buy a property, as this could leave you vulnerable if you have any rental voids or you have to pay an unexpected repair bill.
Negotiate on price
The true art of successful property investing is making sure that you buy at the right price.
Your aim should be to never buy a rental property at retail market value and be prepared to wait until the right deal comes along.
If you talk to the majority of successful property investors they will often be able to tell you of real estate that they managed to acquire at a discount of at least 10% of the current market value.
Your patience will often be rewarded and there any number of reasons why a vendor might agree to take a lower bid, but when they do, it means that you are potentially locking in some profit from the start and improving your rental margins at the same time.
Working with real estate agents
If you become an active property investor in your area, you will almost certainly get to know a few real estate agents, which can be a big help.
If you get to hear about a foreclosure or a property that has just been reduced before it becomes widely available, this can sometime give you an edge on finding a suitable property.
Even if you are just starting out, it doesn’t do any harm to make some contacts and ask a realtor to find you some potentially suitable properties. They may have a vested interest in finding you a property that they happen to be selling but a good agent will have their finger on the pulse of the local property market and this could prove helpful to you.
Just make sure you check out any suggestions they provide and crunch the numbers to see if it is as good a deal as they are suggesting.
Buying your first rental property can be exciting and also fraught with dangers if you are not thorough with your research and planning, but get it right and you could be on the way to enjoying a more profitable future.
Bill Beazley has been building new homes in the Augusta, Georgia, area since 1976. Bill Beazley is past-president of both the Builders Association of Metro Augusta and the Home Builders Association of Georgia. He has spent his entire career developing neighborhoods, plans and quality products that will be appreciated by the most discriminating buyer. Founded in 1986, his locally owned-and-operated real estate firm was built to serve all of the Augusta, Georgia metro area with a conveniently-located sales office in Columbia County. They specialize in all aspects of Real Estate marketing including Resale, New Homes, Lots/Acreage and Commercial/Investment properties. Over the past three decades, their commitment to professionalism, personalized customer service, and results have made them the CSRAs preferred real estate company./p>