Buying your first rental property is an exciting time. You probably have visions of riches dancing through your head as you imagine your rental empire starting with one unit and quickly taking over the world. Before you get too far ahead of yourself, however, you need to make a smart buy on your first property to get the ball rolling.
To help you start on the right foot, we have assembled five tips below.
#1 – Check the Rules
Before investing a significant amount of money in a rental property, make sure there are no laws or rules in place which will make it difficult for you to rent out your property as desired. For instance, you may find locations that don’t allow short-term rentals, which may or may not be an issue for your business plan.
#2 – Keep It Simple
As your first investment, it is probably going to be best to opt for a single-family home. If you try to do something like a multifamily unit on the first attempt, you may wind up getting in over your head. Start out with just one tenant and work your way up from there as your portfolio grows.
#3 – Outsource the Work
Teaming up with a property management company is almost certainly going to be your best bet in this venture. Realistically, do you have time to keep up with your normal job, your duties away from work, as well as managing your real estate investment? Probably not. By hiring a property management company to oversee the day to day issues that may come up with the property, you can live your normal life and keep your investment moving forward.
#4 – Look at a Specific Destination
You don’t have to buy in a suburban or urban area when purchasing your first rental. In fact, you may want to look toward vacation spots in your region, as there tends to be a consistent demand for short-term rental in those areas. Also, you may be able to use the property for your own family to take a vacation, which would be a nice bonus.
#5 – Stay Within Your Means
When first getting started, you don’t want to stretch yourself too thin. If you make an investment that pushes your finances to the brink, you will be no wiggle room if things don’t go right at the start. You may want to start with fix and flip loans in an effort to make money flipping properties before getting into the rental game.