7 STEPS TO BUYING YOUR FIRST RENTAL PROPERTY
If you’re new to the world of real estate investing, or are just getting started, you may not know where to start. Buying a rental property can be complex and overwhelming, but it doesn’t have to be. It all starts with choosing the right investment property in the right neighborhood. In this article, we’ll cover 10 steps that will help get you on your way to buying your first rental property.
DO YOUR RESEARCH
The first step in buying rental property is to do your research on the market where you want to buy. Investing in real estate is all about location, location, location! You need to find a place that has good potential value, but also has a high demand for tenants who will pay rent on time and keep your property clean. You also want to make sure that there isn’t too much competition for tenants, so that you have an advantage over other investors who want to flip houses quickly for profits instead of renting them out long-term.
DETERMINE YOUR GOALS
First things first: determine what your goals are with buying a rental property. Are you looking for long-term cash flow? Do you want to build wealth? Or maybe it’s just about being able to afford to live in an area where housing prices are rising steadily? Whatever it is that motivates you, set some realistic expectations so that when all is said and done, everything feels right with your purchase decision.
GET ADVICE FROM OTHER LANDLORDS
The next step in your real estate investment journey is to speak to other landlords. Talking to a mentor who is investing in the same area (and types of homes) that you are interested in can make all of the difference in the world. When you speak with your mentors / other landlords, it is important that you keep their “investment bias” in mind.
SAVE FOR THE DOWN PAYMENT
As you begin to explore the possibility of buying your first rental property, it’s important to keep in mind how much money to save for a down payment. Ideally, you’ll want to have a 20 – 30 percent down payment saved before: a) looking for an investment opportunity, or b) apply for pre-approval. The following five tips can help you save for a down payment in a timely fashion:
- Pay off any debt that you currently have.
- Set up an automatic savings deposit.
- Lower your rent.
- Drastically reduce unnecessary living expenses.
- Take on a second job.
KNOW YOUR RENTAL PROPERTY EXPENSES
While every rental property is different, all have one thing in common … expenses. With this in mind, before you purchase a rental property, it is important that you know all about the potential monthly, and unexpected, expenses that the property will experience.
DO YOUR OWN DUE DILIGENCE
From looking at schools to understanding the own to rent ratio, there are a number of steps you can take to complete your own due diligence. It’s worth noting that the factors used in the previous step will help identify strong real estate markets. Now, as part of your due diligence, it will be your job to look into the actual neighborhoods within these markets. Ask the following types of questions to guide your research efforts.
- Is the rental property within a good school district?
- Are their local attributes within walking distance?
- Speaking of walking, what would the property’s walk score be?
- How many rental properties are in the area?
- Is the crime rate low?
- What is the average household income for the neighborhood?
- What are the demographics for the neighborhood, and do they align with your identified rental demographics for the local market?
INVEST WITH A RELIABLE PROPERTY COMPANY
Starting a real estate business can sound overwhelming, but by following the above, becoming a profitable property owner will be easier than you’d think when you invest with the right company. Be sure to define your goals, review your finances and watch your business flourish. With the right company, your rental has the potential to help you achieve your goals and become financially free.
Ready to get started with investing in Real Estate? Or looking to expand your Real Estate investment portfolio, Cruxstone Development and Investment Limited is your most reliable partner.
Cruxstone Development and Investment Limited is a metropolitan real estate development and management firm with proven track record to developing high-end and profitable real estate developments.
Invest with us today and get on the path to a better financial future.
For more information on who we are and what we do, please call us on +234 (0) 907 004 5555 / +234 (0) 907 333 5555 or visit our website on www.cruxstone.com.ng