Real estate can be a great investment, but if you’re new and don’t know what to look for, you may struggle when purchasing a new property. Making money while renting out property seems like a great idea on paper, but without the right knowledge, you could end up losing money.
What are some tips on how to buy a rental property for beginners?
If you want to start investing in rental property, you’re in luck! Here is a rental property buying guide for beginners.
Features to Look for in a Rental Property
Before you can start thinking about purchasing a piece of rental property, you need to think about what it is that you’re purchasing. There are some important features you should be on the lookout for! Here are some considerations to keep in mind.
Look Around the Neighborhood
Think about the neighborhood that your rental property is in; would you want to live there? What is the area surrounding the property like?
A profitable rental property will sit in a good, up-and-coming neighborhood. No one wants to live in an area without nice people and the ability to grow! Take a look at the local school district, entertainment opportunities, and so on. If you want your rental property to succeed, you have to find a location that people would actually want to live in.
Look Up the Crime Rate
It should come as no surprise that people want to live in a safe neighborhood. Before you think about purchasing a rental property, take the time to look at the area’s crime rate; the higher the crime rate, the less likely you are to get people to rent your property.
Take a look at the local police department or public library to access the criminal activity in the area. Investigate not only the current crime rate but also whether crime is declining or on the rise. That will give you a better idea of how safe the area is.
Job Market in the Area
It makes sense that those moving into your rental property will want a decent place to work. If the job market in the area is lacking, you may struggle to find people willing to rent the home. Take a deep dive into various job opportunities in the area.
Remember not to only look in one place! Sure, investigating the local area on its own will help you get an idea of the job market, but it isn’t the only way. Boot up your computer and see what opportunities arise there as well; if the job market seems good, then you’re in business!
Natural disasters can happen anywhere, but if the area you are considering is prone to natural disasters, purchasing a rental property there may not be the best idea. Should the worst happen, you will have to pay for any damages caused by natural disasters. In the end, you may up spending way more repairing and maintaining your property than it is worth!
Tips on How to Buy a Rental Property
Now that you have some tips on what to search for in a rental property, it’s time to get into the real tips on rental property for beginners. If you are new to the world of real estate, don’t worry! Here are some tips to help with real estate purchases for beginners.
Pay Off Personal Debt
Before you start considering purchasing a piece of rental property, you need to take a hard look at your own finances. Are there any major debts that you have yet to pay off? If so, then you should hold off on buying rental property.
While everyone is going to have some form of debt when purchasing property, if you are new to property investment, having large amounts of debt can hurt you financially. The higher your debt is, the higher any interest loans you get will be. You don’t have to pay off the debt entirely; instead, focus on paying down your debt as much as possible before you begin purchasing real estate.
Secure a Downpayment
Once you have settled on a rental property to purchase, it’s time to work out the downpayment. While 3% may work for the average homeowner, people purchasing property as an investment have to pay a much larger downpayment. Usually, this is at least 20% of the home’s overall value.
Prepare yourself with the downpayment before settling on a piece of property.
Beware High Interest Rates
If you’re new to purchasing a rental property, you will likely have to get loans. When you’re searching for loans, pay close attention to the interest rates that companies are offering; while it’s relatively cheap to get loans these days, the interest rates can give you a run for your money!
Avoid Buying Fixer-Uppers
House-flippers adore purchasing fixer-uppers, but for someone starting out in investment properties, you should avoid homes that need a lot of repair work. Oftentimes, these sorts of homes are going to cost more to fix than you will be able to charge.
Until you are confident in your abilities to repair a home and have a contractor available on the cheap, try to avoid purchasing broken-down homes. It’s better to save your money until you know you’re ready for a major job.
Start Purchasing Rental Property the Right Way
Now that you know how to purchase a rental property, you’re ready to get out there and start investigating! Remember to be picky when it comes to the investment properties you choose and don’t rush into any sale that you aren’t comfortable with. There will always be a good deal if you search hard enough!
Are you on the hunt for a great rental property in Memphis, Tennessee?
We’re here to help! Contact us with any questions or concerns you have about our rental properties and continue reading our blog for more helpful tips today.