Investing in a rental property is a serious undertaking, but it has proven to be highly lucrative for many people. It takes some understanding of local laws, what renters are looking for, and how to create a budget. But once you’ve done your homework, getting started isn’t as complicated as it may seem.
The first major point an investor must focus on is location; whether you want to rent out your property to tenants or just to vacationers who will occupy it short-term, the location is crucial. After that, you’ll need to think about financing, marketing, securing the property, and how to make sure the space is occupied for as many months out of the year as possible.
Of course, you can look for some help as well. Property managers can assist with many different tasks and help take some of the load off your shoulders, but you can also look for fellow local real estate investors who can guide you along the way. Technology can also help you keep track of bookings and keep the property safe, regardless of whether it’s occupied, and it’s a good idea to make room for this tech in your budget.
Here are a few tips on how to invest in your first rental property successfully.
Look for a property manager
The right property manager will help you with everything from maintenance to helping out with bookings and tenant needs, which will take much of the stress off you, allowing you to focus on other investments down the road. Make sure to carefully vet agencies, and learn where their skills lie. Communicate your needs as clearly as possible so there will be no confusion. If you don’t live in the area, make sure your property manager can be available as needed to handle emergencies or issues. Some property managers such as Turnkey will actually install a digital lock in your home and do a careful screening of tenants and guests.
Location is crucial
The location of your investment property is an essential part of your success, whether you choose to rent solely to vacationers or to long-term tenants. Think about proximity to things like shopping and activities, and do some research on the safety of the area. It’s also a good idea to research other rentals in the neighborhood, not only to get a feel for your competition but also to possibly network with the owners and garner support. Keep in mind that certain neighborhoods and the addition of security measures could help boost the amount you charge for rent.
Invest in the right furnishings and amenities
No matter how you choose to create income with your rental property, it’s important to choose the right amenities to invest in. If your home will be for long-term rentals, consider installing a washer and dryer, hardwood floors or central AC. If your home will be used by vacationers, furnishing the space with durable furniture and flooring makes more sense to help you avoid damaged property that costs a lot to replace. Discovering the amenities renters are looking for in your area will allow you to get the most return on your initial investment.
Be realistic about your income
While investing in real estate can be very profitable, it often takes a while for the money to start coming in, especially if you have to lay out cash for updates, upgrades, repairs, insurance, and permits. Make sure you’re realistic about your budget and financing, and research all the things you’ll need to cover before making any major decisions. Bear in mind that most cities require permits before adding things like hot tubs or freestanding garages.
Investing in your first rental property can be daunting, especially if it’s your first foray into a major outlay of cash. Finding the right funding in the beginning is essential, and with the right planning, you can ensure that the process goes smoothly from start to finish.
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