Buying your first rental property is a big deal, and while it seems like a big financial decision, it’s also an emotional one as well. We believe the most important step you can take is educating yourself on buying an investment property.
Buying rental property can be difficult, especially if you are new to real estate investing. If you aren’t familiar with the ins and outs of this complicated market, or even if you are, you may miss some important considerations when buying property. Use these tips to avoid the most common pitfalls of buying rental property.
Make sure you’re landlord material.
As a rental property owner, you’re responsible for ensuring the home you rent out is habitable and looks top-notch. This means maintaining local building codes. You will need to ensure that the place is cleaned often, perhaps with the help of agencies that deliver commercial cleaning services in Richmond, BC, or wherever the property is. Next, you will need to market the property from time to time if you want the place to see tenants coming by often. You will also need to be financially prepared to cover repairs that crop up during your tenancy or after a tenant moves out. No doubt, managing the property is challenging, but you need to be able to handle the responsibilities that come along with owning the property.
Have a long-term investing plan
First-time real estate investors’ biggest mistake is buying property without setting long-term goals. As a newbie, you can take the BRRRR Method or House Hacking, but having some kind of strategy and plan is crucial to finding any kind of success. When you don’t have a plan, you buy many properties that don’t fit your goals and end up in a mess.
Pay down any debt first
In order to do so, you need to fix or install any repairs that should be done. But these repairs can be quite costly. However, you can reduce that burden by coming up with a repair plan. It’s a pretty simple process that you can follow. The conventional wisdom is this: “Buy first, then pay off the debts.” This strategy can backfire because you are leaving less money for your monthly debt payments by spending the money on the down payment.
Using leverage for buying a rental property
Many real estate investors like to leverage their rental properties as a way to increase profits. When it comes to leveraging it, there are several different ways to do it. The main two are a second mortgage and borrowing against the property’s equity. Your Trusted Leeds Building Surveyors at CJ Bloor (or similar surveyors near you) can also help to identify defects in any property you’re looking to purchase, giving you further leverage to bring the price down.
Save for the down payment
The first and most important step is saving up enough money to make a down payment. It’s a common practice for lenders to require a deposit of at least 20% of the purchase price, and it helps them protect themselves against the risk that they won’t get their money back.
Weigh your financing options carefully
The purchase of investment property can be daunting, particularly for novice investors. In addition to the obvious costs of purchasing the property, like interest rates, closing costs, and down payment, you also have to consider the additional costs of rental property ownership. If this is your first property investment, seeking assistance from expert companies in the field, like Patrick Leo, is advisable. They can help you establish an optimal loan portfolio tailored to your specific needs, considering both your current situation and long-term goals.
Getting pre-qualified for a mortgage loan
Finding a property to buy can be a difficult process. However, buying rental property can be especially daunting. If you struggle to buy a property you want, consider contacting a mortgage professional. Getting pre-qualified for a mortgage loan is one of the tips for beginners on buying rental property.
The term “investing” is often used to describe putting money toward an asset to make a profit. Most people think of real estate, stocks, or bonds when they hear the word “invest,” but another asset class is also considered an investable asset-real estate rentals. For those interested in property investment, buying a rental property is often the best way to get started. However, it can be a daunting experience if you’re brand new to the real estate game. After all, a range of considerations must be made before purchase. There are legal, and tax issues, and financing is an important consideration, too. And unfortunately, many people start their buying journey without fully knowing what they’re doing.