Five Steps to Navigate Getting Your First Investment Property
Buying your first investment property is a significant commitment. Not only must you know what to look for, but you also need to know how much you can charge for rent and spend on expenses. But with preparation and proper management, it can be a stepping stone to even bigger things.
What to Look For
Investigation and research are a crucial part of the process since what rent you can charge will be influenced by a range of factors. For instance, it’s essential to choose the right location, as a town or neighborhood should ideally have a thriving economy and plenty of opportunities for growth. Moreover, renters want to feel safe, and they may not pay a lot for somewhere that has high crime rates or homes in disrepair. Likewise, a property that isn’t itself in excellent condition or has outdated features may also mean a lower rent price. Similarly, the home type, such as a condo or family house, will not only contribute to your rent price but what sort of tenants you will get.
To make the most of your investment, you need to be aware of the possible costs that come with ownership. Namely, you will be responsible for various maintenance and repair issues and may need to budget for upgrades. While some additions can be optional, others, such as new carpeting, might be necessary to attract renters. So, to avoid any surprises, try to gauge if your investment will require improvements, and what issues are likeliest to happen. Of course, insurance can help with this, yet it is another expense to plan for. Indeed, while you can benefit from homeowners insurance designed for landlords, be aware that premiums are higher.
Know What Is Wanted
In short: A successful investment has to hit the ground running, so knowing what renters
want can be advantageous. With that in mind, do plenty of research to explore what people desire. While that may differ by area or demographic, many renters will be looking for properties that are furnished and well-maintained. Still, other features could make your rental stand out from the pack, like having a pet-friendly policy or a home full of available smart tech. Choosing your approach will be a process, but it is worth the hard work and expense.
Plan Out Profits
Knowing what might determine rent is only one part of your planning. After all, not every state has favorable taxes, and you may have to factor that into where you invest since the cost might outweigh the benefits. Still, there are numerous tax deductions and exemptions you might be eligible for. You likely won’t have to pay self-employment taxes as a landlord, and the investment may even day-to-day expenses. For example, specific home improvements can be tax-deductible, as can utilities, if you decide to include them in any rental agreement. So, do your tax research and be sure that where you choose will not impact your profits.
Consider the Long Term
As a first step, consider using a certified financial advisor to discuss your long-term goals. While they are entirely optional, an advisor can explore how you might develop your initial investment. They could also guide how you could use it to expand your portfolio over time. Yet, whatever you do, you must be confident that somebody can efficiently manage your first purchase. In particular, you may want to investigate the benefits of a property manager to tackle the responsibility for the running of your investment. However, before you commit to anyone, make sure they share your drive and want to build a stable business relationship with you.
An investment property can bring with it plenty of rewards. That said, it’s not merely a matter of making a purchase and seeing the profits flow. It’s a process that will take planning and research, but your efforts can turn your investment into a thriving source of income.