Are you looking to expand your real estate investment portfolio and earn passive income? Here are a few tips on finding, purchasing, and managing your first investment property.
Market Research
First, determine which neighborhood you want to invest in. By purchasing a home in a neighborhood that will likely become more attractive in the next few years, you’ll pay less upfront and make more off your investment down the road. Think about the type of property you want to buy. Multi-family properties are popular choices for investors, since you can buy one or more units in the same building, allowing for flexibility with your purchase and maintenance budget.
Whatever type of property you decide on, LendingOne recommends checking out crime reports, data on local home prices, new neighborhood developments, and major business investments in the area. An investor-friendly real estate agent like Tracy Madden can assist you with your research.
Financing Your Investment
How much can you afford to spend on an investment property? Naturally, you’ll need to evaluate your own savings first, but you’ll also want to think about how much you can expect to make from potential rental income. The Nest recommends calculating your estimated net operating income — basically, you’ll subtract operating expenses such as insurance and taxes from your potential rental income to determine how much you’ll liekly bring in per month. Knowing this figure before you buy will help you avoid overspending.
Spruce Up Your Property
Once you’ve received the keys to your brand-new investment property, you’ll need to start putting some money into it in the form of renovations. If you bought a fixer-upper, be prepared for significant costs. Check out other rental properties in the area to find out what kind of fixtures and features that tenants will expect. Decide which projects suit your budget and property, and then start making remodeling plans. You may be able to tackle some of these projects by yourself, but chances are you’ll need to hire contractors to complete most of the work.
Hire a Property Manager
If you don’t have the time to handle every aspect of property management on your own, you should hire a property manager. A good property manager can help you with everything from calculating your rental rate to marketing your property and finding reliable tenants. If you go out of town, they can handle maintenance requests. While this is an additional expense, you’re buying yourself time and convenience, and every landlord appreciates these perks. Hiring a property manager can even make it easier for you to purchase more investment properties in the future.
Get organized
When you become a real estate investor, you become a business owner. If you haven’t already, you’ll need to create a space and processes for running your business. A few steps you might take include forming an LLC so that you can protect your personal assets and open a business bank account, implementing organizational systems and software so that you can keep up with receipts, invoices, and other financial data for tax and business management purposes, setting up payroll processes (if you have or will have employees), and so on. The more organized you are and the better your processes the better you’ll be able to run your real estate investment business.
Investing in real estate is a fantastic way to diversify your portfolio, build wealth, and safeguard your financial future. But investing in the wrong property can lead to regrets down the road. With these tips, you’ll feel confident about diving into the world of real estate investing.
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