Buying your first-ever investment property is an exciting move towards a life of greater financial independence. But like any business decision, investing in real estate comes with some degree of risk. It’s important to plan ahead and ensure that your venture will be profitable before investing your hard-earned cash into such a pricey purchase. Before getting your feet wet in the world of real estate, check out the following tips to increase your chances of success.
Protect Your Investment
A rental property is a massive investment, so take good care of it! Get started on the right path by having a home inspection done before making your down payment. As Investopedia explains, a home inspection will point out any red flags that could become expensive maintenance issues down the line. If your home inspection reveals issues that need fixing, try to negotiate a lower price for the property or back out and move on.
When you finally find the perfect property, install security measures to protect your investment and maintain a safe environment for your tenants. Consider investing in a home security plan that combines low-cost elements with high-tech systems for the most effective solution.
For example, outdoor motion sensor lighting and good window locks can help deter intruders, but a sophisticated alarm system is the best way to stop criminals. According to Home Advisor, alarm systems cost an average of $675, which is a small price to pay to protect your investment from theft and vandalism.
Research Your Rental Market
Ensuring that your investment will turn a profit is crucial to success. According to Mashvisor, the location of your property is the most important factor when determining its potential to make money. Research the neighborhood and pay special attention to walkability, proximity to amenities, access to public transportation, and school districts.
Based on the location and property features, settle on a specific demographic to target with your rental. For example, you might want to tailor your property to young families if the home is located near an elementary school and has more than one bedroom.
Calculate Your Expenses
Before buying a property, calculate your expenses to make sure you will be able to cover your costs with the rent that you intend to charge. Add up all of your monthly expenses, including mortgage payments, property taxes, insurance, and utilities. You can find this information by talking to local property managers, reaching out to other landlords in the area, and calling utility companies.
Landlords also face all kinds of unexpected expenses, including emergency repairs and legal fees, so make sure you account for these as well. Skipping this step could be a costly mistake!
Learn How to Be a Landlord
If you’re going to manage a rental property, learn how to be a fantastic landlord to attract the best tenants. Renters can do more damage than you think! Damage caused by bad tenants is costly and might even force your rental off the market until repairs are finished, further hurting your income.
The best tenants will pay rent on time, keep your property clean, and won’t bog you down with complaints and problems. Taking the time to find great tenants is essential for protecting your investment and keeping your cash flow consistent. You can run a comprehensive background check for under $100, which can save both money and headaches in the long run.
As a landlord, you will have certain legal duties as well. For example, landlords are responsible for a clean and safe environment, and for maintaining the property’s plumbing, heating, and appliances.
Landlords can face serious consequences if they fail to provide properly for renters. You can always hire a property manager to take the daily rigamarole off your shoulders, just make sure you hire someone with a solid background and experience.
Buying and managing an investment property is a significant undertaking, but it can be a lucrative business opportunity when done right. Just remember to do plenty of research before settling on a property and making your down payment. Learn everything you can to ensure your success as you take your very first steps into the world of real estate investments.