Investing in rental property is a great way to boost supplemental income, or even replace your traditional 9-5 day job.
In fact, getting into the rental property business can be extremely lucrative, if approached the right way.
However, it’s important to note that many first-time investors can mistakenly get caught up in the excitement of buying a rental property – and this excitement can easily get in the way of making sound financial and business decisions.
Taking the step from the decision to invest in Abingdon rental property to actually doing it is a big one that warrants a lot of thought.
It comes with risks that you may not be aware of – ones that have the potential to affect the success of your rental property business for years to come. This is a decision to take very seriously.
If you want to avoid major mistakes when you set out to invest in your first piece of rental property, read on to find some helpful tips that are designed to guide new investors in the right direction, right from the start.
Helpful Tips for Investing in Your First Rental Property
1. Have a Plan
Before you jump into investing in your first rental property, you should take the time to devise a solid plan of action.
This will help prevent many unexpected issues that tend to pop up during the purchasing process.
Here are some things experienced property management companies suggest:
- Pay Down Your Debt. Paying down your existing debt does more than help you qualify for a loan. It also creates a buffer once you own the rental property for things such as emergency maintenance issues, unexpected vacancies, and times when your tenant fails to pay rent.
- Create a Budget. This is something any experienced property owner will tell you. Making a strict budget, before you invest in a rental property, will prevent you from getting in over your head. Factor in purchase price, maintenance and renovations, an emergency fund, and the cost of placing a tenant in your property.
- Save for a Down Payment. Even if you have purchased a home in the past, it is important to realize that investing in rental property is much different. You will typically need at least 20% when it comes to a down payment, because there is no PMI available to protect the banks in case you default on the loan.
- Watch the Market. Knowing when to invest is almost as important as having enough money to invest. You should take care to watch the market and see what interest rates are doing at the time you want to invest. Remember, investment property loans will usually have higher interest rates than traditional homes, which can kill your bottom line, even if you warrant high rent rates from quality tenants.
Making a plan before you get into the excitement of purchasing a rental property will help keep you on track during the investment process.
2. Take Your Time Choosing an Investment Property
Again, closing on your first investment property is an exciting time that can cloud your judgement if you are not careful.
Avoid buyer’s remorse by taking your time to find the rental that will work best for your pre-defined budget. Check out any property you are interested in buying before entertaining any negotiations, and don’t take the previous homeowner or real estate agent’s word for it.
Ensure that the property has all the amenities you wish to offer to your tenants. Find out what makes this property stand out from others in the area that are being leased, and take note of all the things you may need to renovate before placing a tenant to make sure it fits into your overall budget.
In any business deal, jumping in too soon harbors room for problems that can have lasting effects on your rental property business.
Give yourself time to find the right one; it will be worth it in the long run.
3. Avoid Fixer Uppers
In the past, we have discussed how investing in a fixer-upper rental property can be a good idea. However, for those that are new to investing in real estate, this may not always be the best idea.
A great purchase deal on the surface often indicates that there is a lot of work needing to be done after you purchase the property in order to make it rent ready.
And, unless you have budgeted this into your overall plan, and are handy when it comes to repairs, chances are a fixer upper is not what you are looking for in your first investment property.
4. Choose a Reliable Real Estate Agent
The real estate agent you choose to help you with your property purchase can make or break your longtime success.
To avoid getting mixed up with a less-than-stellar real estate agent, take note of these helpful tips:
- Don’t get caught up in negotiations with other interested buyers if the purchase price or other details begin to extend beyond what you originally planned for
- Choose an agent that you trust, that has a reliable reputation, is patient and understands your needs, and is communicative throughout the process
- Never let an agent rush your purchase decision, even if that means you lose out on a deal
- Try to get referrals from those close to you that have had success with a real estate agent in the past
If at any time you begin to feel your agent is not being helpful, simply walk away and get a new one.
5. Decrease Expenses
Being successful with your first investment property does not stop after you finalize your purchase.
In fact, closing on a property is only the beginning.
From the start, think of ways you can decease expenses and boost your positive cash flow once you place tenants in your property.
- Make sure all utilities are the tenant’s responsibility
- Build extra costs, such as HOA fees, into the rent rate if you can
- Shop around for homeowners insurance, and require your tenants to get renters insurance
- Make your rental eco-friendly, especially when it comes to major appliances
- Challenge your property taxes if you feel they are too high
- Interview property managers to make sure you are getting the best deal for the services they offer
These small considerations have the potential to save you a lot of money as you lease your rental property, and are easy for new investors to handle.
6. Learn the Laws
Whether you self-manage your rental or employ Abingdon’s best property management team, it is ultimately your responsibility to know and understand the federal, state, and local laws surrounding the landlord-tenant relationship.
Even if something illegal happens under the care of your property manager, you could find yourself in a lot of hot water.
Court fees and fines, a ding on your reputation as a property owner, and the loss of your property if your bottom line is damaged enough, can all result from not knowing the laws.
Educate yourself so that you know how to properly handle any legal situation that comes your way. And, if you have a knowledgeable property management company backing you, think of that as an added bonus.
7. Consider Hiring an Abingdon Property Manager
Getting into real estate and leasing your first investment property can be daunting at first.
You may not know what to do after you have purchased your property, or maybe you are not keen on the idea of self-managing your rental.
No matter the case, the solution resides in hiring a trusted property manager to help you out with everything from advertising your available property to tenant placement; tenant complaints to the lease renewal process.
If you are looking to invest in your first rental property in Abingdon, consider getting in touch with Bay Management Group from day one. With years of experience in the rental property industry, Bay Management Group has the staff on hand to answer all of your questions about being a successful rental property owner.
This way, once you invest in your first rental property, you will already have a qualified property manager in Abingdon ready to help you with setting rent rates, conducting inspections, providing 24/7 maintenance and repair services, and more.