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Buying your first rental property can be a great investment, but it takes research and time to plan to ensure success. Consider these tips when you are buying your first rental property:
Make Financial Goals
One of the biggest things to consider when buying a rental property is your current financial situation. Creating a list of financial objectives can help keep you organized and risk free. Determine what you want out of the rental property: Are you looking for steady rental income, long-term appreciation, or tax benefits? Having goals can ensure your approach to your rental property purchase is strategic and lucrative long term.
Calculate the Expenses and Evaluate your Options
Purchasing a Rental Property has many costs to be considered. These include property taxes, insurance, maintenance, repairs, financing expenses, and vacancies. You want to ensure positive cash flow, so calculate potential rental income carefully. Consider the risk factors such as unforeseen repairs and leave a contingency fund to be financially prepared and safe.
Investing in a rental property has many upfront costs, be open to exploring your financing options. Mortgages and loans can assist you in your investment. Compare interest rates, terms, and conditions from various lenders to find the most suitable option for your financial situation.
Understand the Location and Market
Take time to conduct thorough research on both location and market to guarantee a return on your investment. Location is everything when thinking about buying a rental property. Search for areas with low vacancy rates, strong rental demand, and potential for property appreciation. Put yourself in the shoes of the renter, you may want good amenities, transportation, a safe and secure community, and more.
When looking at a specific location, research the market. Understand market trends in the area such as rental rates, property values and historical data and projections to make the right choices moving forward.
Inspections
Do this before, not after the purchase! Conduct thorough inspections of the property you are considering before you buy. Hire professionals to identify any concerns and assess the condition of the property. Factor these inspections into your budget and negotiations! Here is a list of the general inspections to consider:
- General Property Inspection
- Pest Inspection
- Electrical System Inspection
- Plumbing Inspection
- HVAC System Inspection
- Roof Inspection
- Environmental Inspection
- Structural Inspection
- Insulation and Energy Efficiency Inspection
- Fire Safety Inspection
- Accessibility and Safety Inspection
- Parking and Exterior Spaces Inspection
- Zoning and Legal Compliance Inspection
- Tenant History and Rental Income Review
- Future Development and Neighborhood Analysis
Don't be afraid to be thorough, it will help you avoid future costly issues.
Be Ready for Anything
You can’t predict unforeseen circumstances, but you can prevent some of them by taking time to understand the legal and tax implications of operating rental property, as well as having a plan in place for contingencies. Familiarize yourself with landlord-tenant laws in your area to avoid legal issues. Additionally, understand the tax implications of owning a rental property, including deductions for expenses and depreciation. Develop a plan for contingencies by having a financial reserve for those unplanned repairs or periods of vacancy. A good tip to follow is to have at least three to six months of payments set aside in case you need it!
With good strategic preparation and knowledge, you can ensure you will profit off of your rental property investment. Real estate markets are constantly changing, so stay informed about economic trends, interest rates, and local developments that could impact your investment. Be prepared to adjust your strategy as needed. Start small and scale gradually when starting up to gain experience and confidence, as well as increasing your chances of success when expanding your portfolio with future investment opportunities.
RCN Capital
The easiest way to save on rental property financing is to find a trusted lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. RCN Capital also has flexible and competitive loan options available. Are you looking to purchase or refinance an investment property?
