Purchasing a rental property can be a great investment for just about anyone if done responsibly. Rental properties can provide consistent cash flow without making large-time investments that break the bank. However, it’s not something that you can typically jump right into. It’s important to consider all aspects before you can responsibly secure your rental property investment.
As an investor, the end goal is positive cash flow. In order to do this, there are lots of expenses to first consider:
- Taxes – become aware of any tax benefits that may benefit you
- Mortgage or interest payments – how are these expenses being covered?
- Maintenance and repairs – new appliances, flooring, or paint can add up quickly
- Rental home vacancy – plan for a vacancy at some point in your rental home
- Property management fees – opting for a property manager leaves inevitable fees
That said, it’s important to make note of all the expenses and areas that need to be covered first and foremost to avoid going over your budget.
Create A Plan
It’s no secret that investing in a rental property will be a lot of work. However, there are ways to make the workload lighter. For one, making a plan for your investment can allow you to go over all the steps necessary to make things go as planned. Overall, you really don’t want to take the risk of losing out on time and money.
Your purchase plan should include all the professionals that are essential in securing the property. For example, you’ll want to make sure these people are on the same page:
- Your financial advisor
- Your accountant
- Your banker or mortgage broker
With the help of these experts, you’ll be sure to get the best overall understanding of your spending and decide which investments are right for you and your budget.
Other things you’ll want to consider in your property purchase plan are smaller investments. Home improvements such as new appliances, flooring, and paint are just a few small investments you don’t want to forget. If these things are not noted early on, the purchases can easily add up and create a deficit in your budget.
Check Out Your Competition
Before you go through with your rental property purchase, it would be wise to check out your competition first. Scoping out the best home values and purchase prices is essential in getting the best deal possible. Not only should you be paying attention to your local competition, but it’s important to also check out the national competition.
Examining your local competition will ensure that you are getting a fair price for your property. You should always be able to cover your property’s mortgage and make a profit at the end of the day. If other rental properties near your area are not comparable to your budget, it may not be a wise investment.
Your national competition will just assure that you’re getting a good deal compared to other properties on the national market.
At the end of the day, you are looking to make the smartest, most responsible investment that aligns with your budget and purchase goals. Observing the market and securing the best deal should ensure capital growth over time, which should be the overall end goal.
Inspect the Property Location
Before immediately jumping into purchasing a property, you should thoroughly inspect the overall location. There are a lot of things to take into consideration when observing your property’s location. What is the neighborhood like? Are there schools and daycares nearby? What about major shopping centers and freeways? These are just a couple of important things to take note of before you make your investment.
Here are a few attractions that prospective tenants look for near their rental homes:
- Nice neighborhoods
- Schools and daycares
- Shopping centers
- Sports areas
- Major freeways
- Job opportunities
Doing a little research on the area can do wonders for understanding the value of your property. For example, lots of tenants will be attracted to homes near cities due to convenience and job opportunities. Another thing to consider when purchasing near the city is rental rates. A highly-desired property near the city can allow you to raise rental rates and increase overall value.
Hire A Property Manager
Owning a rental property can quickly become a full-time job if you try to do it all yourself. For that reason, it’s smart to hire a property management group or manager to assist with things like collecting rent, maintaining the property, and screening potential tenants.
Are you looking to invest in one or more properties? Now is a good time to reach out to your local property management group to help with all of your rental property needs.
Bay Management Group is always there to offer professional assistance with your property management. From answering tenant questions to keeping your property maintained and occupied, the experts here can handle all your rental business so you don’t have to.