Because we are a Property Management company, we hear from so many investors who have successfully built their future through buying Real Estate. We also have seen some people who have supplemented their income by buying one or two rentals, and seen small gains month over month. We asked Brad Sawatzky of Colorado Real Estate Pros in Fort Collins to outline what he thought were the five most important tips to remember when investing in rental property.
-Find a great location. If you are looking to buy a home and rent it right away, you need to make sure that it’s in a place where it will be rented quickly. You don’t want your brand new rental home to be sitting on the market for three months before it’s rented. If you buy in a city or location where there is a high demand for renters, you are already ahead of the game.
-Think about your margins. Simply buying a home and then trying to rent it without doing a bit of research is not the formula for success. If you are purchasing a home that will rent for $500 higher than what your mortgage will cost, is that an acceptable return on your investment? Ask yourself how much you need to make after all property management fees are withdrawn every month.
-Are you buying a fixer-upper? Most investors say not to buy a fixer-upper as your first investment property. If you can fix up the property quickly, and for a relatively cheap cost, then it might not be that big a deal to buy an old home that needs some updating. If you are not the handy type, consider buying something that is move in ready.
-Get rid of any outstanding debt. If you have credit cards, or any debt that is going to stand in the way of you financing an investment property, think about paying that down first. If you have cash to buy then make sure you roll in any costs to fix the new investment property.
-Make sure it’s what you want. Will you be the landlord, or will you be hiring a property management company to take care of your new rental? Wil you be fixing up the property by yourself? Do you expect to spend a lot of time prepping the home to rent? Answering all these questions before you purchase is pretty important, so don’t forget to go through this practice.
Investing in Real Estate can be a very extensive process, but once you get it down, you will have the knowledge to potentially do it many times over.