Selecting the right rental units can make or break your landlord business. The right rental property means you can spend less on marketing, will experience less vacancy, and be able to rent to better tenants.
These 6 tips will make you more successful when buying your first investment property:
- Pick a property in the median price range. Do not let your emotions get in the way when choosing a property. You want your property to be right in the middle of the market. This will make it easier to sell later on when you want to cash out. Plus, properties on the low end of the price range usually need too much work. While properties on the high end may be too upgraded and price you out of the rental range for the area.
- When purchasing single family homes, it is best to stay with the most popular style. This is the 3 bedroom / 2 bathroom / 2 car garage home. Since most people look for this type of home to purchase, it will be easier to sell later to someone looking to buy a home for themselves as well as investors.
- If you are just starting out as a landlord, it is best to begin with a condominium or single family home. Large properties can usually offer better returns, but it can be more than you are ready to handle at first. Plus, it’s more difficult to buy a large property and you will need more cash resources.
- As a first time landlord, it is best to choose an investment property close to your home. Eventually you will build up a team of people to work on your property that you trust, but when you just start out, you need to check up on their work and it will be that much easier if it is close. You might also receive all sorts of calls from your tenants. Until you really know what type of landlord you’ll be, it’s best to keep your commute to your property short.
- It will be a much easier start if your first property has a positive cash flow. This will help you save money each month for any major repairs that arise. Often people become landlords because they want or need to move and are unable to sell their current home. The positive side is that you should know your monthly expenses and can price your rental accordingly to generate a positive cash flow.
- Choose a property with some type of market advantage. One competitive advantage could be renting in a college town. This ensures steady demand year-after-year as long as the college is doing well. Another competitive advantage could be renting close to public transportation in a large city. Many renters will not have cars in big cities and prefer to be close to transportation.
The bottom line is to do your research when purchasing your first rental property and create a wish list before you start looking. By taking your time, weighing your options, keeping your emotions in check, and measuring against your wish list, you will make sure to choose the right rental property and start your landlord business off in the right direction.
Photo by: Storm Crypt
