So, you are looking for new ways of making passive money, but are afraid? Buying a rental property may seem hard, but it is in fact just time consuming. Investing in real estate property can be easy. All it takes is some time dedication to educate yourself on the basics of buying a rental property. It is very similar to investing in any other property, it just takes a few extra steps to buy a rental property. You might be asking yourself how to start investing in real estate. Well, nothing in this life comes easy, but here at Mashvisor we simplified the process to 7 easy steps to follow when buying a rental property.
Like anything else in this life, a person needs to do his/her research before starting any new task. Real estate investing is no different. Every real estate investor needs to do research every time he/she is looking into buying an investment property. In order to get an optimal rental strategy, you must ask yourself the right questions. Before starting, you need to sit down and figure out what the best investment property type for yourself is. Once that’s figured out, you must figure out which neighborhood is the right one to invest in. Remember to check in which direction the local housing market is trending. Lastly, consider the average rental income generated in the said location.
Now that you have figured an idea of where to start investing, it is time to start looking at the finances that come with buying a rental property. How much can you afford to pay on a rental property? Moreover, what is the rate of return that is achievable from this investment property?
Related: Buying a Rental Property? Consider These Factors
You may be excited that you have a plan of action, but the truth is you are not ready to begin shopping for real estate properties. However, you are ready to go to talk to the bank in order to find out how much you can afford to pay. Buying a rental property is not cheap, and most people’s resources are limited. Find out how much you can afford and revise your business plan accordingly. There is nothing worse than finding the perfect investment property only to find out that you are unable to afford it. Spare yourself the heartache and go to the bank.
You have now figured out the amount you can afford, the type, and the location of the property you would like to invest in. Write it down on a piece of paper as a reminder of the goal that you are attempting to achieve. It is important to write down the information because it will remind you of the big picture when buying a rental property as well as removing the emotion that comes with buying investment property.
Related: The Advantages and Disadvantages of Buying Rental Properties Close to Home
This is the most exciting time now, shopping for your real estate investment. This is the part that people do not need much advice on. As a real estate investor, you have a specific image of the place that you want. It’s time to go find it. However, it is important to keep in mind to not get hung up on finer details that are found in your dream home. These finer details could raise the price of the home outside of your financial budget. Do not waiver from the plan.
The first step into becoming a real estate investor is to do your due diligence. You think you found the best investment property for yourself. Nothing is as good as it seems. It is time to figure out what is wrong with the investment property. Anyone that has invested in real estate will advise you to hire professionals to look at the real estate property. They can warn you of damages, possible problems that may arise, and maybe even how much they are willing to pay for it. Without this step, you are taking a high risk gamble. It can be completely worth it or a terrible mistake. Do not take the risk, always tread on the path of caution when buying a rental property.
Related: Buying Rental Properties to Grow Your Real Estate Investment Portfolio Is a Must. Here Is Why
Send an Offer
You can not buy a rental property without making an offer on a real estate property. Contact your real estate agent to fill out all the necessary paperwork. No number is definite in real estate, it is time to negotiate. Negotiate a property price that makes the best sense for your financial plan. It is easy to get caught up with the rush of a new home. That is why it is of utmost importance to know that you should walk away from any property that will not be within your price range. You can always hold the upper hand in negotiations when you are willing to walk away from a deal that is not suitable for you. You will find another place just like it, if not better.
An offer goes past the cost of the real estate property. Make sure to negotiate other factors such as the closing date and financial contingency. These are valuable clauses to insert in the offer contract.
Congratulations, you are now part of the residential real estate investing business. You can now become a landlord. It is now time to bring the property into a shape that you are willing to live in. It is time to work on achieving positive cash flow from the rental property. That means to limit the vacancy time and damages. The best way to do so is to acquire good tenants that will treat your rental property with respect. The best advice to give you as a new landlord and real estate investor is that there will be unforeseeable complications along the way. Do not panic.
Buying a rental property is no more difficult than investing in any other real estate property. A few extra steps have to be taken, however, the idea remains the same. Do your research, contact your bank, make a plan, shop for a rental investment, do your due diligence, make an offer, and start your business. Buying a rental property can be an overwhelming experience. This is why we at Mashvisor try to get you all the information and advice that is required to succeed in real estate investing.