Submitted by:Katie Conroy
How to Ensure Your First Investment Property Is a Winner
If you hadn’t already heard, now is a terrific time to invest in a rental property. In fact, Department of Numbers notes rent is steadily rising, and over a third of Americans rent their housing. Those are inspiring statistics, but it’s important to set yourself up for success. Here’s how to ensure your first investment property is a winner.
Remember Financial Responsibilities
Sometimes, first-time investors miss some crucial numbers when they’re computing their budgets, and when that happens, you can quickly get in over your head. To avoid trouble, Redfin suggests asking yourself several important questions. How much rent can you expect to draw each month, and is that enough for a profit? Does the area have a strong history in rentals? Will you manage the property yourself, or will you pay for someone to handle that on your behalf?
Bear in mind the many hidden costs involved with being a landlord as well. Beyond the mortgage and upkeep, you’ll have insurance, legal fees, taxes, and so forth.
There are a few financial incentives that help, beyond the rental income. You’ll have tax write-offs, like depreciation, your home office, and associated expenses such as legal fees and a property manager.
Run Things Professionally
One of the biggest mistakes you could make with your first rental property is to not run it well. Landlords can quickly lose both their reputation and their tenants if they aren’t attentive to details. With that in mind, start gathering information on being a landlord. There are legal requirements to be mindful of regarding upkeep and livability, security deposits, and the like. Even if you’re hiring a property manager, you should become familiar with what those regulations are in your state.
You also should decide early in the game whether you want to oversee property management yourself, or hand the reins over to a professional agency. There are tools available to ease your burden, like mobile apps that simplify rent collection, and templates for your paperwork. Remember, in a hands-on role you need to be available to tenants 24/7, which can eat into your days, nights, and weekends with leaking pipes and broken door jams. If you elect to handle things yourself, starting small and using all the tools at your disposal can help you get your feet wet.
Does running a rental property sound like too much? If you have a home of your own to tend, family obligations, a day job, and hobbies, it can be. The other option is to hire a professional property manager. This takes away a large part of your burden, since these professionals not only oversee the maintenance, they can handle things like rent collection, tenant screenings, and advertising.
If you decide to hire a property manager, RentecDirect recommends finding out things like how much experience they have and their property vacancy rate, and reading reviews by other property owners and tenants. Remember, this person will represent you in a professional manner as well as handle your investment, so you want to find a great fit—and it won’t necessarily be the most inexpensive candidate.
Know the Neighborhood
When selecting a winning investment property, location is a key factor. It affects your ongoing income, future value, and the renters you will attract. Take a hard look at prospective neighborhoods and think about the future of your investment. What area properties are charging for rent is one clue, but also examine vacancies, how long they stand empty, and proximity to workplaces.
Many renters prefer to live where they have a close commute, and they also look at things like school districts, public transportation, aesthetics, and safety concerns. Weigh circumstances carefully, with an eye toward both short- and long-term success.
Purchasing an investment property is a big decision, and when everything comes together well, you can end up with a winner. Examine your finances thoughtfully, decide how you will handle management, and get to know the ins and outs of the neighborhood before you settle on a location. With good choices, you’ll be set up for success.