6 Steps to Buying, Managing, and Protecting Your First Investment Property
According to experts at Mashvisor, the benefits of owning one or more rental properties are vast. From the high return on your investment (ROI) to the various tax deductions you’ll qualify for, owning one or more rental properties can help you to build wealth and achieve your financial goals more quickly. However, buying and managing your first investment property can be a challenge — especially if you don’t take the time to familiarize yourself with the different steps you’ll need to take to get started. To explore these steps in greater detail, read on!
Decide Whether a Rental Property Is Right for You
Before investing in your first rental property, think about your responsibilities as a property owner and how you’ll fit them into your daily life, especially when something is broken and needs to be fixed. Not only will you need to make these repairs on your own or hire a professional to complete them for you, but you’ll need to pay for them as well. Other responsibilities include the need to pay property taxes and homeowner’s insurance costs — in addition to making your monthly mortgage payments in a timely manner.
Identify Your Goals
Once you’ve determined that buying an investment property is the right choice for you, it’s time to identify your goals. For instance, you’ll need to decide where you’d like to buy property, which type of investment property you’d like to purchase, and how much you’re able to spend (homes in Truckee sell for $655K on average). However, keep in mind that most down payment requirements range between 15 and 25 percent of an investment property’s purchase price.
Hire a Real Estate Agent
Next, you’ll need an experienced real estate agent to assist you in finding a suitable investment property. Your agent can then help you to form a team of other real estate professionals such as a mortgage broker, insurance agent, home inspector, and appraiser. You may also choose to hire a property manager, a real estate attorney, and an accountant.
Finance Your Investment Property
Unless you’re using cash to pay for your new investment property, you’ll need to work with a mortgage broker to obtain financing for your rental. Your financing options may include a conventional loan, FHA loan, VA loan, personal loan, home equity loan, or home equity line of credit. However, the type of loan you qualify for will depend on your current housing situation, credit score, debt-to-income ratio, and whether you plan to reside in the property.
Purchase Your Rental Property
Once you’ve found the perfect investment property, your real estate agent will walk you through the process of making an offer. During this time, you should also decide whether you’d like to self-manage your property or hire a professional to do this job for you. While property managers can be costly, they’re often well worth the expense when it comes to searching for reliable tenants and maintaining the investment property.
Protect Your Investment
Whether you’re investing in a cabin, vacation home, condo, or multi-unit property, it’s important to protect your hard-earned investment, especially if it’ll remain vacant at times. As you begin to manage your first investment property, try a few of these affordable security measures.
● Plant prickly bushes and shrubs near the windows.
● Change the locks whenever a tenant moves out.
● Installing a doorbell security system like the Ring Video Doorbell.
● Installing motion detectors and bright lighting around the property.
You may also install an alarm system for added security and peace of mind, but note that you’ll need to pay a one-time installation fee (expect to pay $700 - $1,900), in addition to monthly fees if you choose to connect the security system to a monitoring service.
Owning your first rental property can be challenging, but familiarizing yourself with the steps you’ll need to take as you get started will help you to determine whether this type of investment is right for you. While it may take some time to succeed as a property investor, you’ll likely be managing multiple rentals like a true professional in no time at all.