For a long time, real estate investment strategies have been useful for people interested in diversifying their portfolios, increasing their cash flows and generating residual income. While the thought of buying your first rental property can be a bit daunting, you will come across many other people who are part of the industry that have achieved their investment goals and met their financial objectives. Making your first investment and buying your first rental property can be something tricky, so make sure that you have a solid plan going forward.
Here are some of our top tips and strategies to help you make a wise investment decision.
Know Your Goals
It is a wise move to create an understanding of your end goals. To ensure that your goals are concrete, you should base your goals on realistic expectations, financial capacity, and the investment strategy. To make sure that you get a clear picture of your goals, ask yourself a few questions including:
- When are you planning to retire and how much money are you going to need to cover all your expenses?
- Do you have a current source of income for your retirement?
- How much money are you willing to invest to purchase your rental property?
- Do you need a diverse portfolio to reduce risk, increase your returns and lower your taxes?
The aforementioned questions are going to be of great help in keeping an eye on your end goals when you are looking forward to selecting an investment strategy that becomes the perfect fit for you.
Contact and Seek Advice From Other Landlords
The next step you are going to take is to get in touch with other landlords. Getting in touch with a mentor who is investing in the same domain as you are can make a lot of difference in the property world. When you are going to ask for a mentor’s or proprietor’s help, keep the “investment bias” in mind. Investment bias means that all the property owners have their own experiences, purchasing strategies and, end goals. You can look for different landlords and mentors online as well. To get services from the best ISP, servicing in your area, use localcabledeals.com. This is one easy way to get detailed information on ISPs working in your area.
Save a Considerable Amount For the Down Payment
When you’ll start with exploring possibilities of buying your first rental property, one of the most important things to keep in mind is the amount of money that you will need for paying your initial down payment. You should have around 20% to 30% of the total property price for your down payment when you are looking for an investment opportunity or when are going to apply for a pre-approval.
Know the Expenses Required For Your Rental Property
Every rental property is different. Nevertheless, they have almost the same expenses. Keeping this in mind, before you go for purchasing a rental property, make sure that you know about all the potential monthly and unexpected expenses that you will come across. Some of these expenses include the following:
- Property Taxes
- Unexpected Repairs
- Funds you might need in case of an emergency.
Pre-qualifications are going to be helpful if you need a better understanding of the types of investment properties that you can afford. You need to have the following qualification in order to call yourself pre-qualified. These include:
- Having a credit score of at least 680, which can be 740 or higher.
- Job history of two years at a U.S-based company. Individuals who are self-employed will need to prove their financial stability and income per month for the past 3-5 years.
- You should have the liquid cash needed for the down payment.
- You should have the cash available for expenses of about six months.
- You should maintain a low debt to income ratio on a consistent basis.
- You cannot keep more than 10 financed properties on the current credit report.
Research on Different Rental Markets
You need to conduct some rigorous research and look for different real estate market indicators. These include indicators like job growth, population growth, and city revitalization. Identify a market that meets the aforementioned indicators. It becomes easier when you are working with a trusted consultant during a scheduled strategy session.
Get an Appraisal For Rental Property
If you are looking forward to financing your purchase of the rental property, the lender will order an appraisal. The appraisal will help the lender to ensure that the purchase price and the price of the appraisal are the same. This means that the lender will not give out $200,000 loan for a property appraised at $100,000. In addition, the appraisal is going to get you the peace of mind and make sure that you are not paying more than its actual worth.