Getting started in the rental property business takes a lot of work, but there’s also a lot of payoffs if you do it right. Buying a home that will attract renters is just a small part of the process. As the owner, you also have to budget thoroughly, make a management plan and advertise your property to renters. Below, learn more about the steps you’ll need to be successful with your first property investment.
Get Your Finances in Order
Purchasing an investment property is entirely different from buying a home that will serve as your primary residence. While you can usually buy a residence with as little as 5 percent down, experts say that lenders are looking for at least 20 to 25 percent down in order to finance an investment property. With homes in Atlanta selling for an average of $355,000, this means you’ll likely have to come up with over $70,000 for a down payment.
If you don’t have that kind of money lying around, you’ll need a savings plan in place before you can even think about getting an investment property. It can take a while to save up, but you can speed things along by making it your priority.
Don’t Bite Off More Than You Can Chew
It might be tempting to score a deal on a fixer-upper when you get into property investing. However, if your goal is to start earning income quickly, you don’t want to bury yourself under an endless list of renovations. It’s possible to flip a house and turn it into an attractive rental, but it’ll take a lot longer to start seeing any return on your investment. For your first property, it’s usually a better idea to get a home that’s closer to move-in ready.
Money Under 30 explains that getting a home in the wrong type of neighborhood can also create an overwhelming situation for first-time property investors. Buying in a run-down neighborhood, for example, is usually only a good idea for those who already have a firm grasp on what they’re doing.
Account for Operating Expenses
If you plan on renting out your property, one of the biggest decisions you’ll make is whether to manage it yourself or hire a company to handle that aspect for you. If you’re thinking about doing the work yourself, The Balance recommends asking these questions before taking the leap. For example, will you have enough time to manage the property?
Regardless of the route you choose, it costs a lot to have a successful investment property. Keep in mind that there can be numerous hidden expenses that you’ll need to budget for as well.
Market Your Property
Once your property is ready to rent, you’ll need to market it effectively in order to attract renters. It’s possible to do this yourself through ads and social media, but you can also outsource this to a property management company just as you would any other task.
Protect Your Investment
Even though you won’t be living in your investment property, you still need to have it insured and protected from intruders. Make sure to budget for rental property insurance, also known as landlord insurance, if you plan on having tenants.
It’s also good to have a security system in place. Remember that you’ll also have to budget for monitoring services, which typically range from $15 to $35 per month. A high-tech system will do a great job, but you can also utilize low-tech options to make your home even more secure. Planting prickly shrubs below windows can be surprisingly effective. Even something as simple as installing motion detectors to activate exterior lights can stop an intruder.
Owning an investment property is a lot of work, but it can be highly successful. Whether you choose to rent your home out for passive income or simply sell it down the road, you can get a great profit by following the right steps.
Regardless of how much money you have in savings, you’ll also need to have good credit. Each lender has different credit requirements, so it’s hard to tell exactly what score you need to get approved for a good loan. You can’t necessarily make your credit jump overnight, but there are ways to bump up your score over time.
By Kristin Louis | https://parentingwithkris.com/