Who said an economic recession was all bad news? Not any savvy investors we know! According to most financial experts, including our very own Jason Hartman, now is one of the best times ever to invest in rental properties. Low home prices, combined with low interest rates and thousands of people looking to rent instead of own, make this a real estate investor’s ultimate dream. Let’s review: money is cheap to borrow, and investment properties are cheap to buy. But before you jump in to the rental property market, pay attention to these five important tips for first-time income property investors!
1. Know your property options – You might think this goes without saying, but many first-time investors don’t fully appreciate all the types of investment property options out there. Are you interested in restoring a run-down property and flipping it for quick cash? Or renting out a family home to a steadily employed couple? Or perhaps you are interested in commercial properties like a small apartment building? While you explore your options, be sure to consult an expert.
2. Seek wise counsel – A funny thing about humans is how often we try to accomplish things by ourselves! So many times, we could have avoided that horrible vacation deal to Hawaii simply by visiting the travel agent down the street! Just like travel agents or tax accountants, there are plenty of qualified experts waiting to advise you while you search out a promising investment property. Instead of hunting down the nearest real estate agent, however, choose an investment company that is keenly experienced with rental property investing. Another option is collaborating with someone experienced in real estate investing – oftentimes active investors are looking for more “partners”… (but we don’t recommend this, ask us why!).
3. Location, location, location – The old saying still rings true. The most important element in real estate valuation will always be location! Not only is this true in ALL real estate, but ESPECIALLY for investors looking to rent out the properties they purchase. Why? Because you need to make sure there are people in that market looking to rent! Going after high population areas with growing job markets is key – look for property in safe neighborhoods with good schools in the area, and nearby other amenities like shopping malls and public transportation. There are many other possible tricks – such as finding property nearby a large university in order to attract college students on a time crunch!
4. Line up your capital – Easily the step that most often trips up potential property investors is financing. Speaking to a potential lender or getting input from a financial advisor is highly recommended before you get to far down the path of exploring your investment options. While the beauty of real estate investing is that you can borrow the financing and have your tenants pay for the monthly mortgage costs, you still must be prepared for unpredictable vacancies of the property, which means maintaining a healthy cash balance for that as well as potential repairs and maintenance of the property.
5. Gather your “team” – Brave or otherwise less-financed real estate investors often become landlords overnight, as soon as they manage to rent out their newly acquired rental property. Don’t get caught by surprise! Know the tenant laws of your state and locality to better protect yourself and your property, while providing good customer service to your tenants. Ultimately, however, you should seriously consider the benefits of partnering with a property management company that can take over landlord types of responsibilties including dealing with tenant issues and providing maintenance through sub-contractors. Either way, you should still organize a list of reputable repair and service professionals in your property’s area so you aren’t caught ill-prepared when something breaks in the middle of the night. Better yet, track down a solid attorney and accountant while you’re at it that can guide and assist you with issues along the way and streamline your investment experience.
Are you a first-time property investor or are you otherwise interested in learning more about investing in rental properties? Feel free to contact our team today in order to receive free advice as you embark on your real estate investment journey!