Buying investment properties can vary between one real estate investor and another. Therefore, real estate investment strategies differ along the way. Many real estate investors are going for rental properties as it provides a safe and reliable rental income. Not to mention that many investment properties carry a positive cash flow sign. When buying a house to rent out, you must factor in all the details that come along with buying a real estate property. Through the experiences of other real estate investors, we’ve gathered a few tips to help you along your real estate investing journey.
Tips to keep in mind when buying a house to rent out
Know the laws in your target area
Knowing the law in the area you’re interested in investing in is a must, specifically for the real estate investors who are interested in short-term rental investments. Keep in mind that a few metropolitan cities are banning Airbnb properties for real estate investors by restricting the number of investment properties. Additionally, for the long-term rental investors, you must know tenant-landlord laws in your area to be well-aware of your restrictions.
In any case, knowing the law won’t take longer than a few hours of research and you will benefit greatly in organizing your real estate investment business.
Have a thorough tenant screening process
Many beginner real estate investors leave out this critical detail when buying a house to rent out. You must have possible tenants fill out applications along with previous rental histories. In return, this can make the screening process lengthier but establishes confidence in your decision as a real estate investor.
After all, we’ve all heard the stories that landlords and property investors have told about bad tenants. It’s better to be safe and have a properly screened tenant.
If you’re in the process of renting out your investment property, read this blog post: 5 Tips to Prevent Damages from Tenants.
When it comes to first-time real estate investors and property buyers, it’s always a good idea to start small. By doing so, you are already accustomed to running a property without the hassle of dealing with multiple tenants. It’s an important tip to keep in mind when it comes to buying a house to rent out. Most successful real estate investors have had reservations about multi-family homes until a more knowledgeable state in their real estate investing career. So, focus on single-family rental properties to jump-start your real estate investment portfolio.
Conduct a proper analysis
Many overlook the importance of an investment property analysis when buying a house to rent out. However, by doing so, they are letting go of assurance that their investment property is, in fact, a low risk investment. The best way to conduct a property analysis is through a sophisticated investment property calculator. Of course, you can find out the potential rental income for both traditional rental properties and short-term rentals. In addition to that, you can calculate the cash on cash return and the capitalization rate of any investment property you have your eyes on. With Mashvisor’s investment property calculator, you can cut straight to the chase and save yourself months of research and turn it into minutes. Click here to make use of the 14-day free trial offered by Mashvisor.
Properties with outdoor space are a plus
When buying a house to rent out, keep in mind that single-family properties are going to require small families. Many of these tenants are looking for outdoor living areas. Moreover, by having an outdoor living space in your investment property, expect your rental income to rise 20%, to say the least.
Consider out-of-state real estate investing
Let’s say you live in New York City but are not interested in buying an investment property there. It’s not a problem in the technological real estate investment world that we have today. You can buy an investment property out of state whether you’re buying a house to rent out as a short-term rental or a long-term one. Read this blog to learn more about out-of-state real estate investing: Our Guide on How to Buy Investment Property Out of State.
This is a must-have tool for real estate investors to know the value they’re getting for their investment properties. With a property inspection, expect to pay a few hundred dollars when buying a house to rent out. Moreover, a property inspection can give you a lot of details that you’ve forgotten about while informing you of the real market value of your investment property. A property inspection goes far into the solidity of your real estate investment while ensuring that it falls within the realm of low risk investments.
To learn more about the added value of property inspections when buying a house to rent out, read this blog post: Why You Should Get a Home Inspection Before Investing in Property.
Consider hiring property management
This strategy is not for real estate investors looking to pinch a penny. It’s made for those who want to make a passive income without going through the trouble with tenants and maintenance. Additionally, with today’s professional property management companies, you can learn a lot about the services they offer and compare until you get a company that offers you the right terms.
In real estate investing, there’s no right or wrong. It’s about finding the real estate investment strategy that best fits your needs as a real estate investor. So, keep these tips in mind when buying a house to rent out. After all, you never know when you might need the knowledge.
If you have any more insights about buying a house to rent out, please share them with us in the comments section.