A Foolproof Guide to Buying Rental Property
Did you know that more than 100 million people in the United States of America live in rental housing? Getting started with buying a rental property is a great way to diversify your investment portfolio and grow your wealth. It doesn’t matter if you want a single-family home or a multi-family apartment building, there are certain steps that you should take.
Investing in rental property isn’t difficult but it does require some work on your part to get started with your new rental property. It might seem a tad overwhelming when learning how to buy a rental property but you’re not in this alone.
Luckily, you’ve come to the perfect place to learn all about rental real estate and how to get started with investing in rental property. Keep reading this article to learn some helpful tips that will make buying rental property a breeze.
Educated Yourself When Buying Rental Property
There is a lot of groundwork that goes into buying rental property so you need to be prepared to do your homework and educate yourself if you want to find success with rental property. A great way to get started is to talk with pros in the rental real estate market and pick their brain for strategies and things to look for when investing.
Taking this step will give you the confidence and peace of mind that you’re ready for this big step towards financial freedom and a lucrative new career.
Determine Your Rental Market
A good strategy when looking for rental properties to rent out is to start with homes or buildings that are near you. Try to find a good investment opportunity that is less than two hours away from where you live. Check out websites that list real estate for sale like Zillow to find the best options that are currently on the market.
You’ll get a much clearer picture of the money it will take to purchase these properties. You’ll also gain a better understanding of the best locations to live in that will attract more tenants. You aren’t required to get your first rental property near where you live but it will make the process of getting started much easier than purchasing one that is halfway across the country.
Once you have a better idea of who your target market for tenants is, start analyzing things like the best school districts and the area with the best amenities. You’ll have a much easier time attracting tenants to live at your rental property if your property is in a safe area with plenty to do.
Knowing your rental market makes having success with turnkey rentals a much easier proposition. You can learn more here about investing in a turnkey property.
Figure Out Your Financing
Odds are that you won’t have the cash in full to purchase the rental property that you covet. If you do, your purchasing process will be much more simple. If that isn’t the case for you then you’ll need to figure out your financing. Most lenders require around 20 percent of the price in a down payment before they’ll lend you money for financing.
If you choose to purchase a multi-family unit with four or fewer living areas then you can save yourself a ton of money on a down payment by living in one of the apartments. Taking this step will lower your down payment to a measly 3 percent. You need to get in touch with lenders in your area to learn more about what your options are in order to get the best deal.
If you don’t have the cash for the down payment then you should consider working with other rental real estate professionals in your area. Partnering with another professional will help you bring the down payment into an area that is much more manageable.
Find the Right Rental Property
Once you’ve figured out your financing options, you’ll want to start diving into what you’re looking for from a rental property. Shopping for properties is one of the most exciting and fun parts of buying rental property. It is up to you to decide if you’d rather go through this process alone or get help from a local real estate agent.
Once you’ve found that perfect rental property you can move forward with making an offer on it. Markets get competitive, so make sure that you get your offer in fast if you don’t want to lose out. After you’ve come to an agreement and your offer gets accepted you’ll need to make an earnest payment. This payment is around 1 percent of the total purchase price.
You should also get the property inspected after you’ve purchased it. It is also a smart idea to pay for an appraisal to find out the estimated worth of the property that you’re purchasing. If you’ve hired a real estate agent then they’ll be able to look at the appraisal and compare it to other similar properties in your area to gauge its accuracy.
Determine Property Management
When you become the official owner of the rental property you’ll want to start thinking about property management. Some people opt to manage their own properties but this comes with a number of headaches that you need to consider. Hiring a property manager is a viable option if you’re looking at rental property as a source of passive income.
Make sure that you’re investing in advertising your property to potential tenants. You should also do background checks to ensure that your tenants are responsible. You should also set money aside for maintenance and get a security deposit from all tenants.
Start Buying Rental Property for Your Portfolio
Buying rental property is a big move in the direction of financial freedom and significant passive income. There is a lot to consider when you decide to move forward with putting money into a rental property. You’ll need to do your due diligence on finding the right property and figuring out how to finance it but the rewards are impossible to deny.
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