Perhaps you’ve heard about the many benefits
of investing in real estate, like earning passive income, maintaining control
over your investment, and diversifying your portfolio to protect yourself from
changes in the market. Ready to take the leap and reap the rewards, without
taking unnecessary risks? Here are a few steps you’ll need to take to purchase
and start managing your very first investment property.
When you buy a home that you plan to live in,
you can make an offer with a small down payment, but when you’re
purchasing an investment property, you will generally have to put down about 20
percent of the home price. Don’t get discouraged if this means that you cannot
invest in a home in a wealthier neighborhood. Instead, aim to buy
an affordable home in an area where new businesses and services are starting to
pop up. Ideally, you should settle on a property in a neighborhood where you
can expect home prices to increase in the coming years. That way, you’ll be
able to raise your monthly rental price accordingly and bring in more income.
As you conduct your research, you’ll want to
link up with a real estate agent who specializes
in working with investors. Not all agents are created equal, so make sure that
they have plenty of experience with investment properties in the area where you
plan to buy.
After you go through with your home inspection
(you’ll likely spend $300 - $500) and officially
close on your home, you’ll know which repairs and renovations you’ll need to pay for.
During the inspection, make sure to carefully evaluate the quality of the
central air conditioning system, especially if you live in an area where
tenants will frequently use the AC during the warmer months. If the system is
in need of repair, you could end up dealing with some very unhappy tenants when
the weather heats up.
If the inspection results indicate problems,
you may want to negotiate repair costs with the seller. Replacing the central
AC system is an expensive project, but the overall cost will vary based on the
size of your unit, the difficulty of removal and
installation, the necessary materials, and the labor costs for the removal and
disposal of the old system. Overall, you should expect to spend about $3,757 -
$7,277 on installation costs.
and Meeting Tenants
Once you’ve replaced any outdated appliances
and polished up the interior and exterior of your property, it’s time to start
marketing your rental. Bigger Pockets suggests having
professional photos taken to advertise online, listing your property on several
rental sites, and putting up a “For Rent” sign in your front yard.
As you schedule viewings with tenants, use it as an opportunity
to get to know them and learn more about why they want to rent your property.
Going forward with a credit check and obtaining proof of income is the best way
to determine whether they will be able to pay rent on time.
According to FindLaw, landlords are responsible
for repairs, routine maintenance, and letting their tenants know when they will
need to enter the property. Want your tenants to stay long term so that you
don’t lose out on income while the property is vacant? Make sure to respond to
their requests in a timely manner, especially if your property is in need of an
emergency repair. If your tenants know they can count on you, they’ll stick
around for years to come!
Investing in real estate is a smart choice for
your financial future, but it pays to do your research before rushing to invest
in a particular property. When you invest in the right neighborhood, renovate
your property with modern fixtures and appliances, and run thorough background
checks on tenant applicants, you’ll be able to increase the value of your
rental, prevent extended vacancies, and gain a steady source of income.
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