Guide for buying your first rental property
Buying your first rental property seems exciting. But, it’s also a complex and intimidating process. Especially if you don’t have the experience and you don’t know what to expect. However, you can make the whole procedure a little less overwhelming, with this guide for buying your first rental property. It will give you an overview of what the process looks like from beginning to end. So, let’s start.
Set up the budget for buying your first rental property
Owning an investment property means your budget involves more than just a mortgage you can afford. This is something you need to know, especially if you’re in doubt should you invest in real estate or not. Besides monthly mortgage payments, you also have ongoing costs of owning and renting out the property. Like utilities, maintenance, upkeep, taxes. Compare that with the money you can collect in rent from your target tenants.
Search for similar rental properties in the areas you’re considering. Take into account the property size and the exact neighborhood you’re off looking at. This will give you an idea of what average rental prices people are willing to pay.
Find a real estate agent
When you’re buying your first rental property, having the right real estate agent on your side is key. He will identify homes with the best potential, inform you about average rental prices, and current trends in your area. You can find a real estate agent by asking local investors for recommendations. Or research online and talk with potential ones to find the perfect one for you. But, most importantly, find an agent with the experience serving buy-and-hold property investors. Never hire an agent who specializes in owner-occupants.
Find your perfect property
This is not a personal investment, it’s a business one. So, think of what your target tenants are interested in. Who are you trying to attract? Single young professionals or families? High-end or mid-range buyers? Also, you have to think about the work you’re willing to put into a property. If you love DIY projects, you can buy an older home and work on it later. Use some of the 5 cheap home improvements you could do today But if you’ want your hands off, look for a move-in ready property.
Make the offer for buying your first rental property
This is the most stressful part for homebuyers. That’s why it’s so important to have a trustworthy and experienced real estate agent on your side. His experience and knowledge of the market are crucial for putting the offer. The agent can also advise you on alternate negotiating tactics. Like requesting sellers’ concessions if the price becomes a sticking point.
When your offer is accepted, you’ll need an appraisal and home inspection. This provides your lender with an estimate of the home’s current market value. It’ll cost you around $300-$600. Once you receive a copy of the appraisal, make sure your real estate agent look it over. Just to make sure the information reported matches up with comparables in your area. Then, have the inspector conduct a thorough visual examination of everything. He’ll alert you to anything that needs attention now or in the future. Always make your offer contingent upon the home inspection.
It’s time for the home stretch. This is the easiest step, but it’s also the most tedious. Your agent will inform you about the documents you need to bring and sign.