Buying rental properties takes a lot of time and money, but it can have lucrative results if executed properly. To invest in the right rental properties and achieve monetary success, it is important to do your research and take your time. Here are 3 tips for investing in rental properties.
Tip 1: Use Leverage To Buy Property
If you are planning to invest in rental property, it is crucial to understand the mortgage market. If you do not understand the mortgage market, you are unlikely to invest in rental property properly. In contrast, you can keep costs lower and reduce uncertainty if you know how to use the mortgage market.
When you know how the mortgage market works, you can begin to buy property using leverage. In other words, you can use borrowed money to free up money for any repairs or future investments.
Of course, you need to keep in mind that you will need to pay financing costs when you use leverage to buy property. It is best to consult a professional when using leverage to ensure that you are choosing a financial strategy best for you and your needs.
Tip 2: Avoid Fixer-Uppers
Just as day trading is different from buy-and-hold investors, real estate traders are different from buy-and-rent investors. In other words, real estate traders look to sell their property in less than six months, whereas buy-and-rent investors plan to use the property for their long term uses.
Although fixing and renovating a worn-down property may seem like a good idea for either purpose, it is not worth your time and energy as a new rental property investor. So, it is best to avoid fixer-uppers when you are new to rental property investment.
Fixing a rental property takes a lot of expertise, time, and money. If you are new to rental property investment, you should view yourself more as a real estate trader. Doing so will allow you to focus on immediate results that you can use to strengthen your rental property skillsets.
Tip 3: Buy A Low-Cost Home
One of the best ways to start investing in rental property is by buying a low-cost home. Low-cost homes are a great option because they will require less money upfront and require less ongoing expenses as well.
Most experts recommend starting with a $150,000 home or less in an up-and-coming neighborhood. This will ensure that the home has value in terms of its neighborhood without being extremely expensive for you.
Additionally, it is recommended to never buy the nicest nor the worst home in the neighborhood. The nicest home will often be overlooked for more affordable options next door, while the worst home will be avoided for better options.
One feature to look out for in a low-cost home is acrylic solid surfaces. These surfaces increase the value of the rental property, which will allow you to charge more for rent.
Additionally, consider low-cost homes with a tilt wall construction. Just as the acrylic solid surfaces increase rental value, tilt wall constructions do as well. Finding a low-cost home with either of these features is a great way to secure a higher paying rent.
Investing in rental property can be an overwhelming task. It is best to use leverage to pay for property, avoid fixer-uppers, and buy low-cost homes on your first go around. Doing these three things will allow you to get your feet wet in rental property investment without committing yourself to too much work or money.
Skylar Hammond is a writer for True Trader who specializes in topics such as stock trading, personal finance, and forex. He focuses on helping beginners and experts alike learn more about the market and improve their trading skills.