Learn the Trade
It is important that you strive to learn as much as you can about rental property investing from those who are already doing it. Get to know the process of buying and owning rental properties as well as the best practices of successful investors.
You can also start by reading some of the top books for people new to real estate investing. Get to know a local landlord or two, join business leaders in their area meetings, and read about landlord/tenant laws as well. One way to ensure success in your first investment is to learn as much as you can about the various aspects of buying and owning rental real estate.
Prepare Your Finances
Before buying a rental property, along with learning the trade, you should also prepare yourself financially. If you will be financing your investment with a mortgage, you should first get your finances in good shape. Optimize your credit score, pay down debt, and have at least a 20% down payment plus closing costs saved up before your first purchase.
Bidding on investment properties can become very competitive, so it is wise to choose a lender and get pre-qualified before making any offers. This will increase your chances of getting the best deal on your first rental property.
Crunch the Numbers
When you feel ready to start looking for your first investment property, here are some key calculations you will need for assessing each one. Unlike buying properties like a personal residence or a vacation home, you have to not allow emotion to impact your decision in buying an investment property. You should, instead, evaluate potential properties based on your expected return on investment (ROI), profit margin, and operating expenses.
Be careful also to completely account for all expenses, including taxes, landlord insurance, repairs, and improvements. A thorough rental market analysis for each potential property is also important to determine your expected rental rate and the strength of local demand.
Choose a Strategy
Finally, you should take note of the different investment strategies for owning rental properties. Aside from learning as much as you can about these strategies, it is a good idea to choose an investing niche that is beginner-friendly for your first investment. For example, unless you are a contractor or handyman, it’s best to avoid fixer-upper properties for your first investment.
Consider investing in a lower-cost home for your first time through the process. A lower-cost rental home allows you to experience the full investment process while avoiding a high overall risk of your investment. This is why it is recommended as a starting point for new investors.
Getting started in rental real estate investing can really be exciting and a bit overwhelming at the same time, especially with everything you have to learn before, during, and after buying your first investment property. An expert Hazelwood property manager can ably help you navigate these new waters. At Real Property Management Three Bridges, we work with rental property investors to find and assess prospective rental properties. Contact us today at 636-542-8852 to learn more.