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It Takes a Good Plan to be Successful in Rental Property
(Investment Properties: Part 5 of 5)
For people considering a purchase of a rental home this is truly an opportune time. The tremendously low mortgage rates coupled with attractive home prices makes this a buyer’s market.
However, numerous reports indicate that home prices are rising consistently, although modestly. If you are considering buying a home it is time to take action. Here are a few guidelines to help you plan out your first purchase.
Look to Experts
If you are looking at your first investment property purchase it would be wise to work with a real estate agent that is experienced in these kinds of deals. An agent that intends to work with an investor over the long term will be meticulous about the property recommendations to insure the investor meets their financial goals and comes back to the agent for more homes.
It is also a good idea to speak with other investors. They can provide you some guidance about what to look for in homes, what areas to avoid and other general information that is generally not found in a textbook.
What Type of Investment Do You Wish to Pursue?
Some first investors choose to buy a home at a great price and rent it out on their own. Others use the service of a management firm. And then there are the individuals that buy a home, spend some money on repairs and put the home back on the market at a price to make a profit.
It is important to consider your options and tolerance for risk. Buying a home that you can easily afford while looking for a tenant may be a good opportunity to get your feet wet.
Develop Your Team before the Purchase
If you plan to manage the property on your own, there will be a few individuals you need to contact prior to purchase. First, you will need a lender that can handle investment loans. Second, you should consult with an accountant and attorney to make sure you are covered legally and that you minimize your tax liability. Third, you should speak to an insurance agent about the proper policies to cover your investment. Finally, you will need to talk to a general handyman or one each of plumbers, electricians, roofers, painters and HVAC repairmen. Having these people lined up and ready to work for you will make much of the process go by smoothly.
Choosing the Right Area
It is important to pick a home in an area that is accustomed to rental property. Places with a high population close to schools and shopping districts are usually safe bets. Rural areas can be difficult simply because the number of available applicants is typically small. Keep in mind that you may want to sell the property in a few years. If you buy the smallest, or the largest, home in a neighborhood it can be tough to unload later.
Buying an investment home should be approached as a strictly business transaction. Decide how much you can comfortably invest and how much you hope to make as a return and let those types of items help you with the decision.
Investment/Rental Properties (5 Part Series)