[HOW TO] Avoid Tearing Your Hair Out When Buying Your First Rental Property
So you’ve decided to get into real estate investment. Congratulations! This is a big step — and not one that should be taken lightly.
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After all, in most cases, people get started in their careers, get married, have children, and buy a home before they ever start investing in rental properties. And while stressful, it’s extremely rewarding. Young investors have a particular advantage, as time is on their side and they have more wiggle-room for risks.
Conversely, veteran investors have readily accessible resources and years of financial experience.
Regardless of how old you are, there will be times during the buying process when you’ll want to tear your hair out. Have no fear! Here are some tips to help first time rental property investors remain calm, cool, and collected under their new circumstances.
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Be strategic yet patient – Unless you are planning on flipping homes and getting in and out quickly, don’t rush into things when you’re first getting started. Investing in rental property involves a long-term commitment. Take the time needed to research several prospective investment opportunities, educate yourself on rental property ownership, and slowly build your financial portfolio.
Know your financial standing – In order to go the traditional financing route, it will require up to 20% down. Bankers and lenders take your employment history, FICO score, and portfolio into consideration in order to determine how much of a borrowing risk you are. You can also apply for an FHA loan in order to secure your investment property provided you can meet the principal residency requirement.
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Do your homework – Explore a number of neighborhoods to see if there are potential property investment opportunities that you could take advantage of. Remember, to make a well-informed decision, you have to think like a renter. Look at specific factors such as the condition of surrounding neighborhoods, the crime rate for that area, if there are new developments nearby, where schools are located, etc.
Don’t let your emotions get the best of you– Remember, real estate investing is not about your emotions. It’s about economics. Save those emotions for purchasing your family home. On the other hand, investing in rental property is all about logic, reasoning, and a good return on your investment. The bottom line is to keep the emotions in check and let mathematics have the final say so.
Start with one property – While it may be tempting to purchase several properties initially, it’s best to start small. You can still think big. But it’s best to ensure that this type of investing is something you want to keep building a financial portfolio with. After all, rental property investing isn’t for everybody. You need to be sure that the homeowner is working with the best company.
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Partner with a property management company – First-time rental property investors oftentimes find that they’re not cut out to be a landlord or don’t want the headaches associated with the title. Some of the primary benefits of hiring a property management company include handling all of the administrative and legal responsibilities along with responding to all maintenance and repair requests.