When seeking out their first rental properties, many first-time investors fail to exercise the necessary amount of discernment. Due to inexperience, a disinterest in learning, and various other factors, fledgling investors often make decisions that severely hinder their ability to generate healthy returns. That being the case, first-timers who are determined to find the right property should take the time to get educated and equip themselves with the following tips.
Consult Market Experts
If this is your first foray into property investment, you’d do well to seek out the guidance of market experts. So, if any friends, family members or anyone else in your usual circle has experience with real estate, don’t hesitate to reach out and enlist their assistance. Someone who has seen success with property investments in the past will be able to provide you with invaluable insight on what constitutes a profitable property and a favorable location.
If you don’t personally know anyone with firsthand market knowledge, get in touch with a good real estate investment company. Seasoned experts will be able to show you the ropes of property investment and guide you through your first purchase. They’ll also be happy to offer up answers on a variety of other market-related subjects, such as real estate market bubbles.
Determine an Area’s Level of Housing Demand
Before committing to invest in a rental property, you’ll need to determine how much demand for housing exists in its location. Regardless of how new or amenity-rich a property is, an unfavorable location can significantly hinder its ability to generate returns. With this in mind, make location research one of your top priorities when searching for profitable investment properties.
When carrying out your research, one of the first things you’ll need to do is look into local property values and rent prices. This information will provide you with a good idea of how much you can expect to spend on a local rental, as well as how much you can expect to make with one. Additionally, in the interest of determining an area’s long-term profitability, do a deep dive into current population size, projected population growth, the local job market and median income. The more effort you put into location research, the better-positioned you’ll be to make an informed investment decision.
Know Exactly What You’re Buying
Rental properties are far from small investments. Even a rental in a less-than-ideal area is likely to place quite the strain on your financial resources. That being the case, it’s in your best interest to know exactly what you’ll be getting for your money – and there’s no better way to do this than insisting on a pre-purchase inspection by a certified professional.
A professional inspection will help ensure that any outstanding issues with a property are brought fully to light before you commit to purchasing it. Having a clear accounting of a property’s various problems will enable you to tailor your offer accordingly or confidently walk away from a potential purchase that’s simply too much trouble. Even if you’ve done multiple walkthroughs of a property and personally looked the place over numerous times, this shouldn’t be regarded as a viable substitution for a professional inspection. Certified inspectors are trained to look for and identify issues of which most nonprofessionals are completely unaware. So, regardless of how opposed a seller is to an inspection, state in no uncertain terms that there can be no sale in the absence of one.
Additionally, once you have the results of the inspection, you’ll be able to obtain contractor estimates for repairing any issues the inspector identifies, and the combined cost of addressing these problems should play a crucial role in shaping your offer. Depending on how much work a property requires, as well as the cost of said work, investing in it may not be worth your time or resources.
It’s only natural that you’d want your first rental property to be a maximally profitable investment. After all, considering how much you’re likely to spend on a rental, the desire to see healthy returns is to be expected. However, not all rental properties are guaranteed to net you a profit. In fact, some are liable to lose you a lot more money than they ever stood to make you. To help ensure that your first rental doesn’t turn out to be a lemon, put the pointers outlined above to practical use when seeking out the right investment property.