Buying rental property has become an incredibly successful means of an alternative investment strategy. But thinking about investing is a lot different than actually doing it. There is a substantial amount of things to know which can seem overwhelming or even daunting enough to inhibit you from taking the leap.
It is perfectly okay to have reservations about the process and whether or not it is right for you. Before diving in too deep by get pre-approved for a loan or giving up on your investment property dream, here are a few tips to buying your first rental property to provide a little peace of mind.
Start Looking For a Property Management Company
There are a lot of the nitty-gritty aspects of becoming a landlord or having a rental property that many people don’t consider. This is why you will want to ensure that one of the first things you will want to consider when you are beginning your research into buying your rental property is figuring out how you intend to manage it.
A property management company can assist with a lot of the logistical pieces you may not have considered such as:
- Handling maintenance requests
- Tenant screenings
- Eviction Services
- Legal Contracts
- Market Analysis
It is always better to work with a professional company than it is to try and figure it out yourself. There are several aspects that, if not done correctly, could lead you into a mountain of future or even potential legal issues, especially since many of these circumstances vary based upon which city or state you are in.
For instance, if you are looking to invest in a rental property in San Antonio, Texas, you will want to work with a San Antonio property management company since the laws or requirements may be different than if you were to hire a company based in Dallas, Texas.
Eliminate Your Personal Debt
When you purchase your first home, condo, or townhouse to turn into a rental property, you are going to inevitably go into debt unless you have a wealth of cash to pay in full. This isn’t the case with most people which is why you are going to want to eliminate most if not all of your personal debt.
Not to mention, becoming a landlord in itself will require a substantial amount of money to be put towards renovations, regular maintenance, property taxes, or other unexpected repairs and expenses. You won’t want to be adding to an already substantial amount of student loan or credit card debt if you are hoping to make any type of income in the future.
Do Your Market Research
Buying a rental property isn’t as simple as looking for a house to purchase, getting a loan, and posting to Zillow. It requires a lot of research in finding out which location is going to work best for your personal and financial situation. Plus, not every location is the same when it comes to the housing or rental market.
You will want to start doing your research in terms of what the cost of living is, how many people are moving to the area, demographics within the region, proximity to desirable locations, and several other important features that encompass your overall market analysis. This again is why hiring a property management company is so important since they have the team, skills, and expertise to be able to do the proper research.
There is another aspect altogether when it comes to a location that could sway you towards our decision about what type of rental property you decide to invest in. For instance, if you have found a property that is located near a high tourist destination, you might be better of turning your investment into a vacation property.
Or say you have found a property that is more residential in the suburbs but near a city that is booming in the tech industry, you may want to consider doing a long-term rental property for young professionals or new families. It all depends on the location you are planning to invest in that can make a dramatic change for the future of your property.
Decide On The Financing For Your Property
As we mentioned before, there are various considerations you need to take when thinking about what it actually entails to have a rental property. The expenses could add up rather quickly which is why it is important to think about what financing you intend to have. This is why you will want to have some type of reserve fund for these types of expenses.
We suggest talking to your lender or broker to find out what your financing options are. Most homes will require at least a twenty percent downpayment on a home. Applying for mortgages, such as a VA loan that usually permits zero percent down on a home, will not apply for rental properties. Again, talk to your lender and see what your financing options are along with what an estimated monthly expense would be for your property.
Know Your Legal Responsibilities
Becoming a landlord means you will have certain legal responsibilities you may not have accounted for. Aside from just the lease your tenant or tenants will have to sign, every state has variations of laws that are required of landlords to abide by. This is not only to protect the tenant but to protect the landlord as well.
Do your due diligence into researching what laws are applicable within the state you are purchasing in, but where you are purchasing from, too. Learn about what laws are required, but what potential situations could arise along with what you as a landlord could do to mitigate any particular situation.
To wrap it up, being a landlord requires much more than just purchasing a home and finding someone to start paying rent. There are many factors involved that could change the way you go about purchasing your rental property.
Contact Green Residential today if you are looking for a property management company in San Antonio to help alleviate the stresses of becoming a landlord and investing in property. In the long run, you will be grateful you did.