Wednesday, October 19, 2022 / by Brenda Bianchi
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Buying Your First Investment Property: Tips and Advice
Buying an investment property can be an excellent way to generate passive income, but finding the right house requires a bit of research and prep work. From scouting neighborhoods to selecting the right tenants, here are some tips and advice you can use before you take the plunge:
Finding the Right Property for Sale
Before you settle on a particular location, take time to drive around the neighborhood at different times of the day, and check how many vacancies there are. You don’t want to attract just any tenant to your property; you want to attract good renters that will keep your house and yard in good shape, pay their rent on time, and are going to stay there for a long time so you don’t have to go through the screening process again anytime soon. Fairway Independent Mortgage suggests avoiding fixer-uppers if you don’t plan on spending a lot of time and money on renovating the house after you buy it; pick one that is as close to move-in ready as possible, so you can put it on the rental market and start making money quickly.
Financing Your Investment Property
Just like you would for purchasing a primary residence, Zillow notes that it’s a good idea to get pre-approved for a mortgage before you even go looking for a house. This is the best way for you to know how much home you can afford before you make an offer. And make sure you have a down payment saved up as well; that way, you’ll be ready to make your move as soon as you find the perfect investment property to buy. Your mortgage company may also recommend you have enough to cover a few months’ worth of payments in case you can’t find the right tenant right away, or if there are some unexpected expenses that need to be covered.
Managing Your Investment Property
Once you’ve acquired a house to rent out in order to generate some income, you need to decide if you’re going to be a hands-on landlord or if you’d rather have a company manage the property for you. Even if you decide to handle repairs and ongoing maintenance yourself, there will inevitably be projects that are outside your skillset, such as issues with major home systems like HVAC. It’s a good idea to build relationships with local service companies and keep them on standby.
Being in charge of a rental property isn’t an easy job, and the 9% to 11% of the rent you’ll have to pay a management company may be well worth it, especially if you already have a full-time job keeping you busy. You won’t have the stress associated with dealing with renters, and they will even screen potential tenants to make sure they are a good fit. Management companies are also in charge of maintaining the property, making sure the rent is paid on time and kept to market standards.
Purchasing a Home Insurance and a Warranty
If you want to be financially protected in case of a disaster, you need to buy home insurance for your investment property. The location, age, and condition of your home will determine your rates.
A home warranty provides protection against the cost of unforeseen repairs, making it a valuable investment for any property owner. Benefits of purchasing a home warranty include peace of mind and reduced stress. Additionally, by investing in a home warranty, you can protect your investment and ensure that your property will be as profitable as possible over the long term. When searching for the best Florida home warranty, look for insurance companies with great customer service and generous coverage caps. You can conveniently read reviews and compare the costs for home warranty companies online to help you in the process.
Becoming a landlord comes with its own set of challenges and rewards. So make sure you set yourself up for success by doing your research before you invest. Maintain your property in tip-top shape to keep your tenants happy, be prepared for the unexpected, keep building equity, and invest in a home warranty.
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