By GoldenWest Management
Are you planning on buying your first rental property?
Now is a great time to buy a rental property thanks to low mortgage interest rates and demand for rental properties especially in cities like San Diego, Phoenix, and Las Vegas.
Since more people are investing in rental properties for the first time this article, we will share with you several tips you can use to successfully purchase your first rental property.
Make Sure Your Ready to Invest in Rental Properties
Although your family members, co-workers, and accountant may be advising you to invest in rental properties you have to make sure that you’re really ready to invest in rentals.
Owning Real Estate means that you will be responsible for paying landlord insurance and property taxes and unless you hire a property management company you will be responsible for things like tenant selection/placement, rent collection and more.
Yes, owning rental property is a smart investment thanks to benefits like current income, appreciation, equity and tax right offs but if you’re not ready for the responsibilities which come with being an owner you should be ready to hire a property management company after purchasing a rental or hold off on buying a rental property for a few years.
If you’re ready to invest in rental properties but aren’t sure if you’re sure investing in a property out of state is a smart move, you should stick with investing in a rental in your area because you know what’s happening economically, who’s hiring and the advantages of living there compared to purchasing property that’s out of state.
Determine the Specifics
Before choosing a rental property it’s important to first determine the specifics of what you’re searching for in a rental property including the location that you want to own a rental, because in most cities rental properties that are located close to downtown or close to colleges will rent for more money than rentals in suburban areas.
Investigate the Area Where the Rental Is Located
You should also verify if the area where you plan on buying a rental property has many rentals or not because if a neighborhood is primarily owner occupied this could mean that it might be more difficult to have a rental property there versus owning a home in an area that’s primarily renter occupied.
If you’re not familiar with the neighborhood or area, take the time to drive there to meet with homeowners, landlords (if possible) and people who live in the area to determine what it will be like for renters if you were to purchase a rental property there.
Get Your Budget Ready
Since prices for Real Estate in many cities have reached all-time highs you should set your budget before you start searching for rentals because in this real estate climate it’s very easy for any buyer or first-time investor to overspend.
It’s also important to save at least 20% or more for a down payment because lender requirements are much more stringent with rental properties and the investment rate on a rental property will be higher so you will have to think about that as well.
Avoid Fixer Upper Properties
Yes, most people are talking about investing in fixer-upper properties these days the reality is that fixer upper properties can be costly (unless you know what you’re doing) so it’s best to avoid them and purchase rental properties that are in as close to the move-in condition as possible.
Create A List of Properties
Once you know the specifics of the property you’re searching for, and you’ve set your budget, you should next create a list of properties that match your criteria because this will help you to simplify your search especially when you use online tools to find suitable rental properties.
Some criteria that you should consider applying to your search for rental properties include:
Bedrooms – The single-family home, condo, or duplex should have at least 3 bedrooms.
Bathrooms – 2 bathrooms are recommended.
Square Feet – Home should have no less than 1200 square feet.
Age – The property shouldn’t be older than 25 years old since renovation or demo may be required to remove potentially hazardous materials like Radon, Asbestos or Lead Paint that may be on the property.
Rent – Search online or speak with a property manager to determine the market rent for the area where you are buying a rental property.
Cap Rate – We recommend looking for rentals that offer a 4% cap rate or better (cap rates and gross multipliers are important).
HOA – Check the HOA rules and regulations for the community where you plan on buying a rental property because some communities are very strict and will even go as far as placing you on a waiting list until you can rent your home.
Garage – In today’s rental market it doesn’t matter if a property has a garage or not.
Renovation – Know how much it’s going to cost to make renovations in the property, especially in the kitchen or bathroom, because you may be able to rent a property for $80 to $90 more per month if it has recently remodeled kitchen or bathroom.
Be Ready for Screening Tenants
Once you’ve purchased your first rental property the real work has only just begun since you have to be ready to screen tenants and this should include reviewing their credit score, work history, criminal history and financial history.
Save Time and Money with Property Management
Buying a rental property in Las Vegas, Phoenix or San Diego?
Each city has major differences in terms of average rents and requirements for owning rental property.
Once you find the right rental property don’t attempt to manage it yourself, save the time, money and hassle of managing rental properties by hiring our experienced and professional property management team.
Contact GoldenWest Management today by calling us at (866) 545-5303 or click here to connect with us online.