When you first start dreaming of buying your first rental property the feelings of jubilation, excitement, and motivation are at an all-time high. These feelings don’t have to stop, but having a plan in place to ensure you have a great experience with your first rental property is ideal. We’ve put together a checklist with 8 great tips to consider when buying your first rental property.
Get Financing Approved Early
You need to know how much money you have available to start shopping for your first rental property. Whether you are financing with a mortgage or partnering with other investors, getting the financing approved early is critical to make the rest of the process smooth.
When looking at mortgages, start weighing your options. Are you going to go with a 30 year fixed rate mortgage, or opt for a lower interest rate at 15 years? Does an adjustable rate mortgage make sense for your situation? If you know you need a mortgage but aren’t too savvy to all the ins and outs, talk to a licensed mortgage loan originator to learn more about your options. Make sure to weigh the options from multiple lenders to get a feel for the company you want to trust with the financing of your first rental property.
If you are partnering with other investors, start the conversations early. Get an idea of how much each investor is going to put into the property and how involved each party is going to be. Starting with clear expectations allows for a much smoother journey the rest of the way.
Start With Single Family
The simplest way to get financing, especially with a mortgage, is going to be a single family home. Not only is the financing simpler, you only need to find one tenant. In addition, the wear and tear on the property is typically a lot less extreme with only one tenant.
Or, Start With Duplex And Live In Half
Another option, if you also want a new place to call home, is to buy a duplex. You can live in one half and rent the other half. You will certainly get to know your tenant on a more personal level, and be there when things need fixed. There are definitely pros and cons to being accessible 24/7 to your tenant, so weigh those options.
This is also ideal if you buy a fixer upper. You can live in one side while renovating the other side. Then live in the renovated side and start renovating the now-vacant side. This allows you to have a place to call home and be in the action during the remodeling and renovation process.
Online Payment Portal
Before getting tenants, make sure they have a way to pay rent. It’s 2019, so make sure to have an online payment portal on your website, or use apps like Venmo or PayPal for electronic transfers.
Location Is Always Key
School districts, entertainment, and community safety are always going to be factors for renters when they’re looking for a new place to call home. Make sure to research all of these factors and highlight all of the positives your place has to offer.
Focus On ROI Positive Improvements
When renovating, especially your first rental property, it’s easy to visualize yourself living there. This can be good or bad, depending on your personal taste. Make sure to focus on improvements that are ROI positive. Kitchens, bathrooms, roofing, and windows are all good places to start.
Know Your Marketing Strategy
Now that the financing is in line, the house is ready for a renter, know how you’re going to find someone to move in. Online ads, local college flyer, or social media blasts–all good options, but figure out what works best for you new property. The last thing you want is a vacant property eating away your profits.
Find A Good Tenant
While you’re looking for tenants, and eager to place one into your first rental property, make sure to find a good one. Run background checks, credit checks, and host in-person interviews to ensure you find a good tenant that isn’t going to cost you a lot more money later on.
Buying real estate properties can seem daunting. There is a lot of research, hard work, and money that goes into finding your first rental property. It may not be as glamorous as television shows often depicts it, but if you do it right and enjoy the process, you can have a lot of fun during your journey as a new real estate investor. If you have additional questions, please contact us to let us know how we can help along the way.