8 Tips For Big Returns On Your First Rental Property
Investing in rental property can be intimidating at first, as few people feel comfortable throwing around hundreds of thousands of dollars! However, real estate is one of the most solid investments you can make in the United States and the list of millionaires who have made their bucks from real estate is lengthy. As with any investment opportunity, it’s essential to spend me thoroughly researching your opportunities. Following these eight all-time tips for buying your first rental property will guide you through a challenging investment and make sure you start seeing returns.
1. Understand What Being A Landlord Entails
Before you invest in rental property, you need to come to terms with your new role as a landlord. This means a big responsibility for your tenants living conditions, and o&en the upkeep of a rental property – that’s maintenance costs and wear and tear – can amount to a good whack. A lot of landlords do their own repairs when they start out. If you’re not the handy type, it helps to keep it local and ensure you know how to get a good deal through tradespeople you’re familiar with.
2. Location, Location, Location
Picking the right location for your property can make or break, and the profitability of a rental property can vary wildly across a city. Search out lower property tax rates to keep your costs down. Finding a desirable area for tenants means you need to consider all the local amenities – green spaces, cinemas, schools all contribute to the potential rental value of your property.
3. Start Small
Before thinking about expanding into multifamily complexes or commercial properties – as lucrative as these may seem – invest in single-family homes. These are much easier to manage and maintain, so you can consider this phase testing the water of property management.
4. Watch Out For Interest Rates
If you’re financing your investment with a loan, make sure you understand how interest rates are going to *fluctuate in the future. “Interest rates are low in 2020,” says William Carruthers, real estate writer at Australia2Write and Write My X, “but the cost of borrowing for rental property will be greater than the rates you’ll find for a traditional mortgage.\ High mortgage repayments will significantly diminish your monthly profits.”
5. Know Your Cash Flow
Your cash flow is the combination of expenses flowing into the property and the cash *owing out through the form of rental payments. Your net cash flow can be expected to fluctuate and when you’re starng out with a rental property, you may even make a loss. Planning for this, and knowing when your mortgage rates will decrease and rents rise, is essential to a long term return on investment.
6. Turnkey Tactics
It helps to keep things simple for your first rental property and turnkey real estate – a property that’s already in conditioned to be marketed – is the way to go at first. Kathleen Coyne, a business writer at Britstudent and NextCoursework warns that “it can be tempting to go for the fixer-upper, imagining the huge profit you’ll ake a&er all the work, but this is inevitably taking a big risk. Hedge your bets with a property in good condition before you start taking on bigger projects.”
7. Landlord Insurance
There are so many variables in a rental property that it’s impossible to foresee every unexpected cost. Landlord insurance acts as a bu8er against property damage and a loss of rental income. It’s an investment in your investment that can protect you in the long run.
8. Understand The Economic Cycle
The economic cycle of bust and boom has a huge impact on the property market and buying a property in a recession can see you picking up a great deal with huge potential for a big return. Picking your moment in the economic cycle is a great way to maximize your profit.
Housing is an essential human need and although the market may fluctuate, you can be sure it’s never going away. The responsibility that comes with being a landlord is both personal and economic, but by studying the resources provided here you can be sure to nd your perfect property. In the long-term, taking the plunge into a rental property is a fantastic way to secure your future.