The decision to invest in buying rental property can be both exciting and overwhelming. Investing in real estate can be a very profitable market, but it’s one that requires research, patience, and the right resources. Consider these three steps before purchasing a new rental property.
Do your research
The most important step is to do your research. This includes researching the location, learning the values and rates of similar rental properties nearby, and understanding who your target market is.
The location of your property has a significant correlation to who will be renting it. For example, if you’re looking into purchasing real estate in a humble neighborhood, then you can generally expect the majority of your renters to be young families. Or, you may consider investing within a college community. These renters have a tendency to come and go more frequently, which can have both its pros and cons.
The location can also add or take away from the value of the property. How far is it located from town? Does it have noisy neighbors or surroundings?
These are just a couple of examples of questions you might ask yourself when looking at the location of property options. Look into current rates for rentals in close proximity to your potential choice to get an idea of what to expect should you go through with the purchase.
Weigh costs and benefits
If you’re new to the rental property game, then it’s best to start off with a low-risk property. If the location is fairly new, or if there isn’t much collectible data on the area, then it may not be the best prospect for investing at the time.
If the home is a fixer-upper, then be sure to know your skills and resources. Understand what you’re getting yourself into, and weigh the cost of resources and time that it will take to fix up the property—whether you plan to do so yourself or hire on help.
Find a Property Manager
Along with weighing your costs and benefits, it’s good to know your limits in regards to your time, energy, and skills. Property managers offer a number of skills that can significantly lighten your load. Take the time to assess your assets and create a list of areas you could use some extra help in. Property maintenance, financial responsibilities, and regular inspections are just a few of the many areas property managers can offer assistance in.
Your property manager is going to be working closely with both you and your tenants, so it’s just as important to do your research on finding the right manager as it is to finding the right property.
Buying a rental property is not something to be spontaneous about. Rather than jumping in blindly, take care to do your research and understand the location and market to the best of your abilities. Know your strengths and limits, play it safe for your first time, and look into hiring the help of a property manager. Happy hunting!