Define Your End Goal
When you buy your first single-family rental home, it is important to set clearly defined end goals. Before you start your property search, you should think about what kind of investment property you want and what features you want it to have. For instance, you might be looking for properties in a particular location with a specific number of bedrooms or a minimum amount of space. You can also focus on a particular renter demographic, such as college students or retirees. If you have clear preferences, you can refine your search criteria and locate potential properties more quickly.
Prepare Your Finances
Aside from determining what qualities you are looking for in a property, it is vital to prepare financially before you purchase an investment property. Experts suggest that it’s a good idea to pay off your personal debt and save for a down payment before beginning your property search. Reduced personal debt can help you get better rates for loans, while nearly all mortgage loans for an investment property will require a 20% down payment. Arranging to finance in advance is another vital step, but be careful of high-interest loans or mortgage products that seem a little too good to be true. By getting prequalified for a mortgage with a reliable lender, you will be ready to grab investment opportunities as they come up. By putting your finances first, you can more confidently buy that rental property when the time comes.
Crunch the Numbers
After completing these vital preliminary steps, the search for the right property begins. One critical thing to consider during your search is that you should run a series of numbers on each prospective property, such as your margins, operating expenses, and expected return. This is where a lot of new investors commit serious mistakes.
New investors sometimes forget to incorporate all of the expenses related to purchasing and preparing the rental property for lease, as well as ongoing property management, upkeep, and vacancy costs. Based on industry experts, a margin goal of 10% and a 6% return in your first year means that you have a profitable investment.
Stay Objective
It is important to keep in mind that an investment property is just that, an investment. Getting attached to a particular property or allowing your feelings to affect your choices is not a good idea. Additionally, the property you buy is not necessarily a property that you would ever live in yourself. Experts in the field say that for your first investment, you should choose low-cost properties in high-demand areas. But avoid fixer-uppers unless you have a lot of experience remodeling homes or know a good contractor who will do the work for less than the going rate. Your first single-family rental property should be seen as the first step toward a long and profitable investment career rather than the end goal in itself. So you can stay on track and make sure your investment properties are making money.
Design a Management Strategy
In conclusion, bear in mind that buying a rental property is just the first step. To ensure that your investment is profitable, you need a proactive management plan in place. This is where hiring a great property management company can help. As local market experts, property managers can help you find off-market investment properties, examine market conditions, set rental rates, and much more. Actually, as more professional investors will tell you, the correct property management company is a vital partner in profitable rental property investing.
If you have found the best investment property, ensure that you find the perfect Layton property management team. Contact RPM Northern Utah at 801-546-1770 today!