Investing in rental properties can be a good starting point for beginners in the world of real estate. After all, these properties ensure positive cash flow and generate value from appreciation. If that’s not enough, the investors can also avail of tax deductions and incentives from owning real estate.
Though there is no denying the lucrativeness of investing in rental properties, you still have a lot to know before putting down your money. It’s the kind of real estate investment that needs a lot of dedication, time, and involvement.
So, do you plan to invest in rental properties? Following are the seven tips to help you out:
Consider whether you can become a landlord
Becoming a landlord involves a lot of responsibilities. It is not solely about buying a property and getting tenants to stay in it. If this is your first time as an investor in a rental property, it helps to know your way around the toolbox. Simple work like unclogging the toilets or fixing the drywall is best carried out on your own.
Even though keeping a property manager sounds great, remember that it’ll take away from your profits. So, focus on adding a few more properties to the portfolio before hiring a manager.
Figure out where you should invest
Beginners usually want to buy rental properties right in the area where they stay, though this might not always be a great idea. Your decision to buy the property should depend on the market conditions. So, if you stay in an area where the property prices are pretty high, getting a positive cash flow from rent wouldn’t be easy.
Of course, you don’t need to look for properties two cities away because that will be hard to manage. But, don’t start the search from your backyard, too. Look for indicators like economic expansion and job growth.
Determine the kind of properties to invest in
Single-family rental properties are just one of the many avenues for investment that you have. You can go ahead with a triplex, duplex, or something even bigger. In fact, you can even consider long-term or vacation rentals.
Regardless of the property type you select, it’s important to understand the kind of properties in demand. For instance, an area might have too many one-bedroom apartments available for rent but few two-bedrooms. So, investing in two-bedrooms should be the strategy. Use a good property finder Doha to locate such rental properties for investment if you live around this area.
Make arrangements for financing your investment.
Most people can’t buy an entire property in cash. Therefore, you must figure out your financing options beforehand. The underwriting process and all the paperwork need to start right after zeroing in on an investment property.
Remember that interest rates vary based on the type of property you are buying. Also, try to put a higher amount down to get a better interest rate from the bank or financial institution you depend on.
Stay aware of all the legalities of owning the property
Owning a rental and becoming a landlord gets you into a lot of legal obligations. And, you need to be fully aware of the landlord-tenant laws in your locality and state. For instance, you have to understand your rights and duties regarding fair housing, eviction rules, lease requirements, security deposits, and so on.
Read the laws of your state before making the down payment. After all, as a new real estate investor, the last thing you would want is to get involved in legal hassles unknowingly.
Plan in advance for the unexpected costs
You must have figured maintenance and upkeep costs into your income from the property, but that is not enough. What about a sudden storm that causes roof damage? Or, what if burst pipes end up destroying the kitchen floor? If you did not plan for such emergencies, you’re in for an unpleasant surprise later on.
A good idea to tackle such emergencies is to keep aside at least twenty to thirty percent of the rental income for sudden expenses like these. This way, you will always have funds for carrying out urgent repair work.
Avoid taking the route of house flipping
House flipping is a popular and viable real estate investment strategy, but it’s not for beginners. It is tempting to buy properties for a bargain and turn them into excellent rental properties. But, as a beginner, you might not have the experience or skills to do that successfully.
For becoming a house-flipper, you’ll either need to be skilled enough to do all the home improvement yourself or have a contractor who can do great work for cheap. If neither of these factors holds for you, flipping would just be an expensive affair.
Rental investing is a great idea for beginners because it’s simple and has a high earning potential. But, don’t assume that you’re going to bring home a huge monthly paycheck right from the first month. As you follow the advice given here and keep learning, those paychecks will improve for sure.