Tips for Buying Your First Rental Property
Are you interested in purchasing your first rental property, but you are feeling a bit nervous about the process and you aren’t really sure about how to go about doing it? If so, these tips for buying your first rental property will help you with taking those first big steps so you can finally experience what it feels like to be financially independent.
Tip #1: Be Smart with Your Mortgage
Choosing the right mortgage when purchasing a rental property will help to make the process go more smoothly. While it may be tempting to obtain a short-term loan in order to get it paid off as quickly as possible, it is generally best to obtain a long-term mortgage loan so you can keep your monthly costs down. This will allow you to maximize your monthly cash flow while also freeing up the cash you need for maintenance and repairs on your current property and to purchase additional investment properties in the future.
Tip #2: Know Local Laws and Regulations
Before purchasing a rental property, it is important to research local laws and regulations that may impact your property. Zoning laws and building codes, for example, may restrict what you can do with your property or how it may be used. In addition, many cities have short-term rental restrictions in place, which may limit your opportunities for renting out your property. While you will still be able to rent the property to long-term tenants, you may not be able to list it on sites such as VRBO or Airbnb for short-term rental. Therefore, if this is part of your investment plan, be sure to purchase a property where this type of rental is allowed.
Tip #3: Start with a Single-Family Home
Rather than invest in an apartment complex or even a multi-family home, it is generally best to start with a single-family home. Not only is this likely to be a smaller investment, but the upkeep will be easier and you will only have to deal with one tenant. After you become more familiar with the ins and outs of being a landlord, you can then expand to additional single-family homes or possibly up your investment game to a multi-family home or a commercial property.
Tip #4: Screen Tenants Thoroughly
If you are purchasing a property that already has tenants, you may not have much of a choice about keeping them. Before purchasing the property, investigate these tenants to ensure they are not likely to cause you issues in the future. If the property does not come with tenants, be sure to screen all potential tenants thoroughly. This means conducting a background check and a credit score check while also examining landlord-tenant records.
Tip #5: Work with Professionals
Other professionals in the business can help you with your rental property investment. A mortgage broker can help you find the right loan while a real estate broker can help you find the right property. Similarly, a property management company can help with maintaining the property and completing the day-to-day operations so you can be free to look into additional investment opportunities.