One of the most consistent investments that can be made today is a rental property. Real estate can be somewhat volatile, but rentals are in need during the good times and the bad times. When managed appropriately, you can have a consistent level of income. To get started, you’ll need to get a great property that will be attractive to potential tenants. Find that and you’ll be able to secure that investment using these 6 buying tips.
1. Purchase directly from the owner whenever possible.
Buying a rental property for profit means finding the best deal possible. Go through your community and find the distressed homes that are in your area. Make contact with the owners and see if they’d be willing to do a short sale with you so that you can maximize your investing power.
2. Raising capital is sometimes better than a mortgage.
Rental properties are a business investment, even if you’re the only employee of your business. Sometimes you can get better terms by raising capital for your business investment instead of taking on debt. You’ll have to sacrifice a portion of your income in return, but you’ll be debt-free.
3. Watch out for dead neighborhoods.
Just because a rental property is an amazing deal doesn’t mean that it’s actually a good investment. If there are several distressed homes in the same area, then there’s a good chance that there won’t be much rental activity there. Everyone has moved away. If no one is there, you won’t get many tenant applications.
4. Look for areas where there is strong job growth.
Lots of jobs mean lots of potential tenants. You may need to look outside of your local community in order to find a great property, but it’s worth the effort. Many investors can charge higher amounts of rent in strong job growth markets and profit more in the long run.
5. Give yourself a rental profit.
If you do decide to take out a mortgage, make sure to calculate a certain percentage of profit from the rent that you charge. You’ll need enough to cover your mortgage and any property taxes or HOA fees that are due, of course, but a 5% upcharge for profits will help you make a little – even if you’re planning on using the rental one day to retire.
6. Don’t settle for the first property you see.
There are numerous investment opportunities that can be found today. There are numerous properties that are on the market still today, so if one investment doesn’t feel quite right, then it isn’t. Keep looking and you’ll be able to find the perfect property.