Is there really a right time to buy your first rental property?
Buying a rental property can happen when you’re a fresh college graduate or someone with 10+ years of work experience. Real estate investing is less about age, as it is about acquiring experience and knowledge in the industry. We’ve put together a list of things that can trigger your first investment property purchase –
So you should buy your first rental property when…
You’ve done your research
Conducting real estate research is crucial whether you’re a first-time real estate investor or whether you’ve been doing it for years. Your research should include learning about the best investment locations.
Location is a very important component when it comes to real estate. Being well researched on real estate market(s) can make property investing a smoother, better-planned process. The best places to invest in real estate are usually ones that engulf good neighborhoods, have good school districts, and have access to amenities such as transportation, restaurants, malls, parks, grocery stores, etc.
Some things to keep in mind when researching real estate markets are the general state of the economy, the job market and job growth indicators in a specific area. The more job opportunities there are in a town or a city, the more people will move there.
Additionally, cities where there’s a high concentration of students usually do well with real estate metrics because you know for a fact that demand for rental property is high.
Ultimately, doing your research will help you find a good location, and consequently, a profitable investment property.
You’ve looked into the legalities of real estate investing
– more specifically, if you’re investing in an Airbnb rental property. Most recently, many cities nationwide have had their share of legal battles with the home-sharing service. New York City, Boston, and San Francisco are all rather controversial cities when it comes to Airbnb rental properties.
Airbnb regulations are made to, well, regulate the use of the platform, especially as more and more investors are choosing to rent out properties using the website. And while these regulations are beneficial to stakeholders, they can, in a way, limit real estate investors. At the same time, it’s not impossible to work with them. So to make Airbnb real estate investing possible and trouble-free, make sure to get acquainted with these laws and regulations and to abide by them.
You’ve sorted out the finances
“Failing to plan is planning to fail.”
If there was an adage relevant to real estate, it’s this. Planning in real estate is a vital element to success. It involves multiple aspects. You’re essentially planning for investment strategies, a timeline to work with, and your finances.
And when it comes to investment property financing, things can get tricky. When planning your finances, you should be calculating costs, fixed and variable expenses, expected cash flow, (possibly) mortgage payments, among other things. Also, you should keep in mind that investment properties usually require a 20% down payment. So make sure you have that secured before you go ahead and buy your first rental property.
Now grab your notes and write down the following:
What is the cost of buying the investment property, and what is the cost to renovate the property? Are you attempting forced appreciation to sell, or are you renting your property out for rental income? Answering these questions will aid you in knowing what your finances will look like when you buy your first rental property.
You’ve bought a rental property calculator
It’s crucial that before you buy your first rental property, you buy a rental property calculator, also known as an investment property calculator. If you’re unfamiliar with the rental property calculator, it’s a tool that real estate investors use to calculate values such as return on investment (ROI), CoC return, cash flow, and cap rate. All it takes is some data input on your end, and the calculator does the rest of the rental property analysis for you – within a few minutes.
This tool will also aid you in conducting real estate market analysis. It will provide similar investment properties needed for real estate comp analysis. Real estate comps help you compare an investment property that you’re considering with other properties similar in size and location to determine what price to pay. With the investment calculator, you don’t need to manually look for the comps.
The rental property calculator is one of many real estate tools that have become quite popular among investors as they add the element of ease and convenience to an investor’s work routine.
Have you tried Mashvisor’s rental property calculator? It can help you calculate the above-mentioned indicators, but that’s not all. It offers special features like neighborhood analysis and can even show you the optimal rental strategy (traditional rental properties versus Airbnb rental properties) for your property. To learn more about our product, click here.
You’ve (preferably) cleared your debts
Real estate is generally considered to be a safe investment, but it’s a big one nonetheless. And you don’t want to be going into a big investment carrying previous debts. What debts might an aspiring real estate investor have? You may be carrying college tuition debt, credit card debt, a car debt, etc. Clearing your debts before you buy your first rental property can also be a way to mitigate some of the risks of real estate investing. Getting into an investment debt-free means that you have one less finance to account for.
Are you ready to buy your first rental property?
We say yes if you’ve checked the above things off the list. Of course, they are all suggestions. Some real estate investors have bought their first investment properties not having planned well, or not having researched the market well. But the difference is that following the above tips will definitely help you become a more successful real estate investor.
When do you think you should buy your first rental property?