A Big Deal: 3 Tips for Purchasing Your First Rental Property
Are you looking for a way to build passive income and grow your wealth? Buying a rental property is a great option, but only if you know what you’re doing.
Buying the wrong property can quickly become a catastrophic mistake. Many would-be property moguls end up destroying their aspirations by getting in over their head on their first property deal. Luckily, there are some things you can look for to improve your odds of success when you buy your first real estate investment.
Read on for three things you should look for when buying your first rental property.
1. Research The Market
The last thing you want to do is buy a rental property only to realize that no one wants to rent it.
Before you buy any property, but especially a rental, you want to research the area that the home is in. Does the neighborhood have a good or bad reputation? Do home values tend to go down or up after five years? Is the area in line for any block grants?
You should also check the crime reports for the area. You won’t get top dollar for your rental if people have to worry about their safety. If you can’t find any crime reports, you can always contact the local police department. They’re normally willing to answer any questions about high-crime areas.
You should also check the local tax records to see how much of your profits Uncle Sam will expect as well. Remember, as the landlord, you’ll pay for the insurance, taxes, and repairs!
2. Look for Water Damage
When you inspect a home before you buy it, keep an eye out for water damage. Dark spots on the ceiling mean that water is getting into the home, which could mean that the home’s roof is damaged or that the ducts from the HVAC have leaks. Either way, this is bad for multiple reasons.
First, you’ll need to either replace the roof or HVAC ductwork, which can cost thousands of dollars. It could also mean that you have a mold problem, which will cost you a lot of money and time to replace. As a landlord, you can’t rent out a property with a known mold issue as it can cause health problems for the inhabitants.
A sagging ceiling is another sign of water damage. If you see any of these signs, reevaluate the value of the home as-is vs. when you fix it.
3. How Long Has The Home Been on The Market?
If you find a potential rental home that’s been on the market for a long time, this could be a cause for concern.
Let’s say you find a three-bedroom two-bath home for $70,000. After you inspect it, you realize that the home doesn’t need much work. If this is your first real estate investment, it sounds like a dream!
The problem is that the home has sat on the market for six months. If no one wants an obviously under-priced home, it’s usually because there’s a serious problem that would cost several thousands of dollars to fix, or no one wants to live where the home is. If no one wants to live there, how are you going to rent it out?
You’ll see a lot of homes that say they’ve “recently” been used as rental homes. Find out when that is, as many realtors have a loose definition of the word “recently”. Since this is your first real estate investment, you need to look for turnkey rental properties that you can quickly rent out.
Always Do Your Research Before Buying a Rental Property
These three tips will help you make your first rental property a success. As an added bonus, we’ll let you in on a secret that you should know: once you buy the rental property and start clearing it out, never look in the fridge. Tape it up and throw it out, no matter how nice it looks. Take our word for it.
For other tips when it comes to creating passive income and getting ahead in the real estate game, bookmark our blog and check back often for more articles.