Buying Your First Investment Property
Are you thinking about investing in rental property? Before spending your hard-earned money, you want to be smart and do all of your homework (and I mean ALL of your homework) as the business you’re about to embark is multi-dimensional.
Before investing it is also important to become familiar with the marketplace. For example, those thinking about investing in the Los Angeles market would be happy to know that the number of renters far exceed folks that own their homes. In fact, only 36% of residents own their home in the Los Angeles area. Although, all would-be investors should be happy hearing about a recent Harvard University study which concluded that the number of people who rent where they live is expected to increase by 4 and 4.3 million by 2023.
Here are a few basic tips on how to buy your first investment property:
Invest Wisely – First and foremost, you need to be confident that this deal is going to make money and not lose money. Sounds simple enough I know, but you might be surprised to see just how difficult determining whether or not the deal is a money maker.
Manage Your Investment – You’ll not only need to know all your rights as a landlord, but you’ll also need to know the rights of your tenant(s) plus all applicable laws. Or, of course, you can hire and reputable management company for a small fee. Just make sure you add the management fee back into the deal.
Set Up Your Business – You’ll need to understand the back end of the business. You’ll want to offer you and your business the best personal and business protection on top of reaping the biggest benefits. The entity of choice for most real estate investors is an LLC.
Other Variables – Besides knowing all of the above before buying your first investment property, there are a lot of variables that factor into planning your new business venture. One of the variables (which actually falls into the knowing whether or not this deal makes money category,) is knowing the current and the projected rental market conditions.
Is Now A Good Time To Invest? – Another critical component as it relates to buying your first investment property is one-word “timing.” I think the one question I hear consistently is “is now a good time to invest or should I wait and hang out on the sidelines for a little bit longer?” I’m of the opinion that as long as you’re properly educated and financially ready – you can press the go button as you see fit. If you ‘re waiting to time it correctly, you’ll probably never pull the trigger.
Invest Where There Are Renters – When looking at areas to invest in you’ll want to make sure the rental property is located where there’s a large pool of potential-renters. Not only do you want the site of your investment property to be in a desirable and rent friendly area, but you’ll also note the less desirable the area, the riskier the investment. Good areas include neighborhoods near schools, near freeways for easy commutes, near employment centers, downtown business districts, and shopping centers.
Hire An Experienced Real Estate Agent – It is important to have a real estate agent that knows the business. Keep in mind that when it comes to helping investors in purchasing an investment property, most real estate agents are trained to help folks sell and buy homes, not investment properties.
Hopefully, you’ve found this information helpful. I started investing in rental properties in 1990, and I can personally say that it was the best business decision and I couldn’t be happier. I’ve managed to grow slowly while building a thriving business over the years!
If you are thinking about buying your first rental properties – the good news is that it is possible to start generating rental income one investment property at a time. I just recommend that you that you do your homework and you take all the guesswork out of it before jumping into the water!
Chicago - Beginnings