Investing in rental property seems like a sound idea, especially when you consider how the extra monthly income can bolster a bank account. However, taking a step into the position of landlord needs careful consideration to get the best outcome for the long run. There is a lot more to it than just buying a piece of property. Here are four tips to help guide first-time rental property owners.
Keep Your Day Job
Property ownership can lead to more money and even wealth when the property portfolio is large enough, but in the beginning, be realistic. One property might net a few hundred dollars extra every month, but it’s not a get-rich-quick thing, and it’s certainly not enough to support anyone. You’ll need your regular income to continue living your normal lifestyle. In the event something at the rental place needs repair or replacement, that money comes out of your pocket, so it’s best to have a steady income.
Pay Down Debt
Already carrying a large debt load is a sign that you don’t need to add more to that burden. Pay down some of your debt before investing in a rental place. You’ll need as many available funds as possible for the down payment, which is likely much higher for the rental location. Other than the property price, you’ll have to cover any repairs the place needs. Property ownership can be costly, and to make money, you need to spend less than you make on it. Starting before you’re financially prepared can put you in a money pit that’s hard to climb out of.
Learn the Biz
Lacking any sense of what it really takes to invest in and own rental property could lead to financial disaster. Read up on real estate buying, renting and selling. Talk to people who are already successful owning rental property. Look up local building code and zoning information so you know what you need to do and can do in your area. Learn everything you can to be a knowledgeable rental property owner. Don’t buy until you do this. While it may take a few months, that investment of time will be a tremendous benefit when you finally get to invest in property.
Make Good Buys
That fixer-upper might have a great price tag, but how much will it cost to make all the necessary repairs and upgrades? When figuring out those costs, consider the potential problems lurking behind walls and under floors. Leaky pipes, termite damage and more could be waiting for discovery. Purchase property this is as close to move-in-ready as possible. Also try to stay away from areas that have too many empty homes, which is an indication that people don’t want to live there. Signs of a good neighborhood include low crime rates, good schools, and amenities, including parks, restaurants and shopping centers. When you do find a house to buy, go for one that has few to no problems and a price that won’t break the budget.