Taking the step towards buying your first rental property is a major investment and can as well be a lucrative one. A primary objective of dealing in real estate is mainly to acquire wealth and one of the fastest ways to build your income in real estate is producing top rental properties. What makes a rental property considered ‘top’?
It doesn’t necessarily need to be a money pumping machine and it doesn’t need to be a “no money down” deal either, though all of these would make it better. A simple definition of a perfect investment property is one that brings multiple returns on every dollar spent on it. Every investor would need every single penny to work overtime, producing revenues as much as possible while continuously paying off debts associated with the property. When you purchase investment properties with such goals in mind, you basically have no limit to how far you can grow your net worth and personal income.
Investment properties can be a perfect investment option if you learn to purchase the right property for your investment while taking into consideration every precaution needed. Take your time, do your research for favorable properties in your desired neighborhood and read some top tips provided from the real estate industry to guide you through the process of buying your rental property.
Here are tips to guide you through the process:
- Use leverage to buy your investment property: It is advisable for potential real estate investors to understand the mortgage market. If you go for the right mortgage option, it could help your purchase be more affordable and reduce uncertainty about the property’s cash flow. Putting to use your mortgage leverage can save some cash so you can later do some required repairs. More to that, a mortgage can be seen as a double edge sword since there will be associated financing cost.
- Be aware of short-term rental restrictions: With more of short-term rental companies such as Airbnb and VRBO, most cities have implemented short-term rental restrictions. You may have other restrictions from your HOA or your condo association and some might not allow short-term rentals of under 30 days. Read your HOA agreement and be aware of every law that is implemented before buying an investment property to be sure it can be used as a short-term
- Screen your tenants: Use background checks, credit score checks, and landlord-tenant records to screen your tenants. If they have been in landlord-tenant court or have a bad credit score, think twice before making a decision.
- First, invest in single-family homes: For a start, you must be looking for the simplest way of becoming a real estate investor, single-family homes should be your best option. The maintenance is way easier than the multi-family or commercial properties. With just a single tenant, you won’t have much work on you and the experience can get you equipped to go big and handle the multi-family homes.
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