The Quick Guide to Investing in Your First Rental Property
You’ve thought about investing in real estate, and you’re one step closer to pulling the trigger. Real estate can be lucrative and give you the financial flexibility to reach your life goals. Investing in real estate has a few steps, including finding the right property and making sure you turn a profit.
Investing in real estate might feel overwhelming, so we’re here to help. With the right tools, investing in rental property can help you reach financial freedom. If you’re ready to get started, read on for what to know before investing in your first property.
Get Clear About Your Expectations
Before you take the plunge and buy a property, you need to be clear about what you expect from this long-term investment. The key is to be honest about what you want. Remember that there are a variety of investors, from someone who pays cash in full to someone who opens a second mortgage.
Is your property meant to be a nest egg for something further into the future, like retirement or helping your children? Are you hoping to make a profit, and if so, how soon? These are the kinds of questions you’ll want to ask yourself to determine the type of property to invest in. The more specific you can get with your answers, the better.
Choose Your Rental Property Type
If you answered the questions above, you should have some insight into the kind of rental property you want to pursue. In general, are you interested in long-term or short-term rentals? In many cases, you’ll have the freedom to change between the type of rental in the future. However, if you invest in a townhouse complex whose strata doesn’t allow short-term AirBnB-type stays, you’ll be locked in.
Long-term rentals are the most common goal of first-time investors because it often poses less of a risk. Once you get a long-term tenant, you can breathe a sigh of relief. You’ll have plenty of property options for long-term options, including condos, townhomes, sing-family homes or even apartment buildings. Typically, these properties are rented out for a year lease.
Short-term rentals offer stays for weeks or months. Often, the property comes furnished since people usually rent these homes for vacation. Short-term rentals can be lucrative, given they are in a prime location. This kind of investment property requires a little more research as it can be riskier. On the other hand, it’s not uncommon for first-time buyers to purchase a second home in a location they enjoy visiting. Some people enjoy making sure their property isn’t always booked so they can enjoy it, too.
The Cheat Sheet to Choosing a Rental Property
We’ve all heard of the golden factor in real estate: location. The internet would have us believe that we can choose a property that will make us rich in no time. But what exactly are we looking for? To break it down, you’ll want to know what the demand for rental properties is in the area, as well as the vacancy rates.
Demand and vacancy information will tell you whether you will be likely to find tenants repeatedly. When it comes to choosing the right property, don’t forget to call on help. Your local realtor has a wealth of experience, a good understanding of the market, and knows the area. You can also do some additional research yourself. You’ll want to look for things that indicate economic growth, like population and job market trends.
Plan for the Upkeep
You may have thought of the upgrades your property may need after you buy it, but have you thought of the long-term maintenance needs? Rental properties require both maintenance and management. Make sure to plan and save for expenses like repairs or upgrades down the road.
Also, don’t forget that rotating between tenants will translate to all kinds of tasks. You’ll need to do walk-throughs and inspections with your tenants as they move in and check for damage when they move out. You may want to arrange for a cleaning service, particularly if you’re renting a space that is furnished. If you’re looking for help, you may want to consider hiring a property manager. They can help you with screening tenants, scheduling open houses, and handling inspections. Check out our services to see how Ronin Property Management can ensure your property is taken care of.