Purchasing residential properties is a great way to invest your money, provided you’re doing it correctly. You’re likely to encounter some challenges along the way and the difference between success and failure is determined by how they are met. Fortunately, you’re not the first to travel down this road. Numerous other investors have offered their own advice on how to proceed.
Here are some common sense tips on investing in residential property:
– Straighten Out Your Finances
Before making any major purchases, you should always get your finances in order. This means paying down current debts, restoring your credit, setting money aside for emergencies and making sure you can afford the place you’re interested in, whether it’s occupied or not. A rental property is a business and although there’s no guarantee you’ll have tenants for the entire duration of the mortgage, the bank will still expect you to pay. A low-interest loan will make it more affordable, but you’ll have to demonstrate financial stability.
– Write Down Your Goals
The best way to succeed at any new venture is to know what your goals are beforehand, write them down and read them back to yourself regularly. If your goal is to acquire a certain number of rental units, it could take awhile with only single-family houses. While you’re looking through dozens of those, you could be missing out on great deals with multi-unit buildings that will allow you to achieve your goal even sooner.
– Understand the Market
Like anything else, the real estate market has its ups and downs. It can be a wild ride, making it difficult for new investors to determine when the best times are to buy, sell and raise rents. An investor that’s completely immersed in the real estate market develops a feel for these things over time and tends to receive greater returns.
– Commit Yourself to Learning
Each real estate deal is different in its own way. Acquiring some of these properties may require creative approaches you’re not yet familiar with. Fortunately, a number of books, websites, courses and other publications have been created with the goal of disseminating this knowledge. Thus, there’s no reason to give up or assume that you “can’t” figure out a way to make something work. Chances are, someone else has been through a similar situation and shared it with others. The more you immerse yourself in the world of real estate, the more you will learn about the different types sellers, buyers, tenants, agents and properties you’re likely to encounter.
– Find the Right Property
Although this could take some time, it’s worth looking at several properties before sinking your money into one. Just make sure your first one is small and easily manageable. If your first property is a multi-unit building with more than a handful of tenants, it’s easy to get overwhelmed and find yourself wanting to get rid of it. One common strategy is to purchase your first property as a personal residence and live in for a period of time before renting it out. Make sure it’s one that doesn’t need a lot of work. Houses that need major rehab work are best left to experienced investors.
– Plan Carefully
As a landlord, you have a number of different responsibilities. How you handle them is your business, but if you don’t think about this before you get into this position, things could go south really quickly. Rather than taking care of these properties yourself, consider hiring a property management company to do it for you. Work this in ahead of time, while you’re first crunching the numbers. If there’s room in the budget to pay professionals to take this off your hands, it would be wise to do so. To learn more about property management and other available services for landlords, read about it here at MorrisDibben.co.uk.
– Screen Your Tenants
Just because you’ve decided to become a landlord doesn’t mean you should accept just anyone as a tenant. Although nicer-looking properties do attract better renters, you should still screen them before allowing them to live on your property. Be sure to get a credit report and check their employment history. Bankruptcies, poor credit and past evictions are red flags you should pay special attention to. Verify their income as well, so you’ll be confident of their ability to pay on time.
Perhaps the best advice for any aspiring property investor is to take the necessary time to analyze all aspects of a deal before plunging in. There’s lots of money to be made with rentals, but it’s just as easy to lose it all because of poor planning or disinterest in seemingly insignificant details. Remember that your tenants are real people and the only way for you to win is to provide a winning situation for them, as well.
Elbert Austin works as a property investment consultant with a background in finance. His articles mainly focus on smart ways to make money work for you when property investing.