Are you a first-time real estate investor looking for tips on finding and managing the perfect property? Then you’ve come to the right place! There are a few essential steps real estate investors need to take in order to guarantee returns on their investments. This guide has put together some helpful information on what those steps are.
Investing in Experienced Property Management
Since this is your very first investment property, you don’t want to take any risks that could reduce your return on investment (ROI). So instead of attempting to manage your rental on your own, let experienced pros take care of all that management stress and hassle for you. For example, if you invest in a Miami vacation rental, connecting with a management agency will make finding those first renters so much easier. A property manager can provide you with 24/7 local support, professional cleanings, and access to up-to-date booking info, so you will always know when your property is unoccupied and who is renting your home. Hiring a property management company, instead of self-managing investment properties, is critical for investors who lack the experience needed to attract reliable tenants, collect rent, and coordinate timely maintenance. Plus, investing in a property manager, can help reduce stress for new landlords.
Estimating All Potential Investment Expenses
Property management costs are not the only long-term expenses you need to anticipate. While a property manager can ensure that the rental’s maintenance and repairs are completed, you will still need to cover the additional costs associated with these jobs. How much those repairs cost will depend on whether you have contractors complete the repairs or take care of some of the repairs on your own. Creating a home maintenance fund will prevent your finances from being thrown off track by any surprise costs. Aim to set aside around one percent of the total home value in this savings account, and keep in mind that you will need to do this for each property you own, including your personal home. Another additional cost to plan for are any premiums related to investment property insurance, which you will need to fully protect your property.
Weighing Financing Options for Investment Properties
Figuring out a plan to cover routine costs associated with a new investment property can help you protect your ROI, but you also need to be aware of any potential upfront costs. Acquiring financing for investment properties, for instance, tends to come with more initial expense and more restrictions than securing a mortgage on a primary residence. You will likely need to put down anywhere from 20-40% in order to be approved for a loan, plus interest rates and lending fees tend to be more costly. If you have multiple mortgages or less than perfect credit, you may also need to prepare to have six months’ worth of payment held as liquid capital. Or, you may need to pay down some debt before you can take out a loan for your investment property. So keep these potential costs and requirements in mind as you budget for your investment.
Researching Popular Locations and Profitable Properties
After you’ve completed the necessary financial planning and have a good idea of how much you can afford to pay for your investment property, you’re ready to begin your search. Start by narrowing down your choices when it comes to prime locations. Miami consistently earns a spot on this list with reasonable home prices for first-time investors and a constant flow of tourists and transplants looking to rent properties. With a city in mind, you will want to start researching popular rental neighborhoods, such as Brickell and Edgewater in Miami, so that finding renters will be less of an effort for you or your property manager. If you opt for a vacation rental instead of a long-term rental, you should look for homes near tourists hotspots to boost your ROI.
Whether you invest in a vacation rental or a residential property, you want to have all of the help and expertise you need to make that investment worthwhile. So, keep this article handy to guide you through the process of investing in your first rental property.