Apr 25, 2019 - 09:24 AM
The real estate business can be extremely profitable if you are smart and patient. When you're about to make that first real estate investment property purchase, here's a list of what you should do before hand to make sure everything goes as smoothly as possible. These are not in any specific order, but good advice.
- Call the building inspector: Always make sure you have building inspector come out and check the property for structural integrity.
- Use Leverage to Buy the Property: The right mortgage could help keep costs low and reduce uncertainty about the property’s cash flow.
- Invest Enough to Be Cash Flow Positive: If possible, put a big down-payment on the property. This will ensure that you are making more money than you're putting out.
- Hire a pest control service: to spray for rodents, insects etc. When you first make the property purchase and then periodically thereafter.
- Know Your Marketing Strategy: If you are investing in a rental property that is vacant at the time of purchase, it is crucial for you to find quality tenants as quickly as possible. Before purchasing your rental property make sure you know your plan of attack for marketing the rental property.
- Have a Written Lease in Place: Have a very clear lease in place with all details written out so that there’s no confusion about the tenant’s expectations. The lease should include when the rent payments are due, what the lease termination fees are, and if pets are allowed on the property.
- Screen Prospective Tenants Thoroughly: Nothing will kill your ROI faster than bad tenants. Properly and thoroughly screening potential tenants is crucial to making your first rental property a failure or a success. There’s no excuse not to screen all applicants. Companies like MyRental offer a free online application for tenants and a monthly subscription for landlords to verify previous addresses, criminal backgrounds, and eviction history. Use this and other tools like it to your advantage. Never take a person's work, Get everything in writing and and make sure their landlord reference is legitimate and not just a friend they used to say good things about them.
- Invest in turnkey real estate: Turnkey real estate is simply a term which describes properties with existing tenants and property managers. Ideal for first time investors.
- Learn to manage your own properties: This means instead of hiring a management company, you learn to do paperwork, screen tenants and keep the bulk of your monthly profits. If your you're not comfortable with talking to people, its wise to hire a management company.
- Line up your financing early: If you’ll be using a mortgage when buying your first rental property, it’s important to weigh out all your financing options carefully. You should choose a 15-30 year mortgage. If you can pay it off early, then by all means pay the property off early.
- Hire good contractors: When it comes to fixing up a property to rent out, you'll want to find honest and most affordable, but quality contract workers available to you. They are instrumental as to how your property turns out in the end.
- Always do the numbers first and keep accurate records. Never overspend on property materials if doing a rehab. This will save you a lot of unnecessary headaches and some money.
- Invest in Single-family Homes First Invest in single-family homes first since it’s the simplest way to get started as a new real estate investor. The upkeep is easier than multi-family or commercial properties. This will give a chance to get comfortable working with people and getting to know them on a personal level. (Get a feel for the kind of people who will be living in your property.)