Buying your first investment property is a significant step. Of course, it also involves trial and error, and most property owners dont see success (or wealth) overnight. That said, following these tips will help you be a savvy property owner and landlord.
1. Ensure Your Property Has Curb Appeal
No matter where the property is located, curb appeal will be instrumental in renting itand keeping tenants happy. Fortunately, many curb appeal upgrades are affordable and quick to completelike power washing the homes siding and adding potted plants to the front walk.
Another straightforward way to enhance curb appeal is by painting the house before you list it for rent. Painting is time-consuming and requires equipment and appropriate planning, however. Hiring a professional to paint the exterior of a home might be the best way to go. Costs vary depending on the size of the home, type and brand of paint, and material type. In general, you can expect to pay around $.50 to $3.50 per square foot for professional painting.
2. Secure Financing That Works for You
Not every first-time investor has cash in hand to buy a property. Even if you dont have a bottomless portfolio, you can still secure funds for your rental house or condo. Of course, some mortgage options, like FHA and VA, only allow owner-occupied loans. But you may be able to take advantage of the lower rates and purchase a multi-unit property, living on-site to meet the residency requirements.
There are caveats to financing with a mortgage, however. For example, interest rates are higher for income property home loans because investors have a higher default rate than homeowners. Shop around for the best dealand make sure your credit is in good shape first. Credit scores above 700 are ideal, notes The Mortgage Reports.
3. Flip CarefullyIf It All
Investing in a property that requires significant renovations can be a smart choice. However, many first-time property owners take on more than they can handle alone. Unless you are a general contractor or another construction professional, buying a property as-is may not be the best option.
Inadequate funds and expertise are two significant reasons why flipping houses goes sideways, notes Investopedia. For landlords, sinking money into a renovation project can also delay rental income, meaning your up-front investment is even higher.
4. Set up your rental property business
After making the decision to start your own rental property business, youll need to decide what type of business entity you plan on filing with the Secretary of State. Most rental property businesses choose to establish an LLC for the legal protection it offers them. To file your business, youll need to fill out paperwork with the Secretary of State, Internal Revenue Service, Department of Revenue, and a bank of your choice. That is not mentioning any copyrights or trademarks youll need. All that paperwork is understandably hectic though, so if you value your time its a good idea to hire a company that can file all that paperwork for you.
5. Plan for Expected (and Unexpected) Expenses
Property ownership comes with some non-negotiable expenses. But as a landlord, youll also need to plan for unexpected repairs and household upkeep. For example, consider property taxes and other financial details of managing an income property loan. Yearly or monthly fees do apply, and you need to factor those into your rental price.
Of course, problems do arise with rental propertiesand youll be financially responsible for many of them. Diverting cash to a property fix-up fund is vital for keeping your rentersand your mortgage lenderhappy.
6. Know How to Rentand to Whom
Clearly, you cannot discriminate against potential renters. But you do need to have a screening and application process in place that ensures only quality tenants can inhabit your home.
Knowing the legal specifications for your areaor homeowners associationis vital. In most cases, you canand shouldscreen applicants backgrounds and credit and require renters insurance.
Of course, you can also leave the responsibility of finding and managing tenants to a professional. Especially if you live far away from the home, hiring a company or even a live-in manager might be the right choice. Note that youll pay for such services, howeverbut the perks of not dealing with tenants directly might be appealing.
Embarking on a property investment journey can be both exciting and intimidating. Being well-prepared increases your odds of success and a lucrative investment opportunity. With these tips, you can avoid the hazards of becoming an investor and landlord and reap all the benefits.
For help finding the perfect investment property, contact W Home Group at 443-901-2200.