According to the U.S. Census Bureau, there are roughly 20 million rental properties scattered throughout the country at this time. More than 70% of them are owned by individual investors.
If you’re interested in the idea of adding a rental property to your investment portfolio and becoming a landlord, you should look into the possibility of doing it. Buying an investment property could prove to be one of the very best investments you’ll ever make.
But before you start shopping around for income properties that you might want to buy, you should learn the do’s and don’ts of buying an investment property. It’ll ensure that you make a smart investment that will pay off over time.
Take a look at the do’s and don’ts of purchasing a rental property below and keep them in the back of your mind as you look to add to your investment portfolio.
Do: Make Sure You’re Ready to Own a Rental Property
There are lots of different ways that you can invest in real estate at this time. Buying an investment property and becoming a landlord is just one of the ways in which you can do it.
Prior to taking the plunge and purchasing an investment property, you should make sure that you’re ready to own one. Not everyone is going to be cut out for the job.
Once you find a great income property, it’s going to be up to you to do everything from finding tenants for it and collecting rent for it to maintaining it and making minor and major repairs to it. You’ll need to do some serious soul-searching to guarantee you’re up for the challenge.
Don’t: Assume Being a Landlord Is Easy
Becoming a landlord is a big responsibility. You shouldn’t ever assume that it’s going to be an easy job to do.
As a landlord, you will be able to bring in passive income to some degree. But that doesn’t mean that you aren’t still going to have to put in some work from time to time to protect your investment.
You’ll need to be sure that your investment property is safe enough for people to live in. You’ll also need to make repairs to it as necessary and upgrade it in the coming years so that you can keep the right amount of rent coming in.
Far too often, those buying an investment property will make the assumption that this property will help them make money without them having to do much for it. But it can be a more difficult job than you may think at times.
Do: Look for the Right Place to Buy an Investment Property
Because there are so many rental properties all across the country, you shouldn’t have any trouble finding one to buy. But you don’t want to purchase a rental property in just any city. You also don’t want to invest in a property in just any part of a city.
It’s going to be very important for you to look high and low for the right place to buy an investment property. Ideally, you want this property to be located in a place where property values could potentially rise in the years to come.
Memphis real estate, for example, should increase in value in the not-too-distant future. It’s why you may want to consider scooping up income properties in Memphis if you can.
Don’t: Purchase an Income Property Without Doing Research on It
If you’re lucky enough to find a rental property in a hot real estate market like Memphis, you might be tempted to buy it right away without doing much homework on it. This is one of the worst mistakes you can make when you’re buying an investment property.
You wouldn’t buy a house to live in without having it inspected from top to bottom to see what kind of condition it’s in. So why would you do this when purchasing a rental property?
If this property isn’t in decent shape, you might not be able to collect as much rent as you hoped with it. You might also put yourself in a position where you’ll have to make repairs all the time or even upgrade it completely before long.
For these reasons, you shouldn’t ever rush right into buying an investment property. You should look at it from all angles and attempt to make a smart decision when you’re on the brink of buying it.
Do: Consider Investing in a Turnkey Property
If you’re willing to put in some work on an investment property to improve it, you might be able to get even more bang for your buck than you would otherwise. But oftentimes, investors who are interested in purchasing income properties don’t want to have to spend a bunch of time and money fixing up a property before renting it out. This will be especially true when they’re buying a property in a city that they don’t live in.
In a perfect world, you should search for a turnkey property while shopping for Memphis real estate. You won’t have to do anything with it other than market it for rent and get tenants into it ASAP. It’s the easiest way to start turning a profit on a rental property.
Don’t: Overlook the Importance of Finding a Property Management Company
If you’re going to be buying an investment property that is right across the street from your own home, you might be able to get away with not working with a property management company. You can take care of things like collecting rent and making repairs to your property yourself.
But if you’re going to be purchasing an investment property in another city, state, or even country, it’ll be a much different story. You’re going to need to have a reputable property management company on your side that can take care of these tasks for you.
A property management company is going to come at a small cost to you. But it’ll be well worth it to get the peace of mind that will come along with not having to worry about doing much with your rental property other than collecting the cash it brings in.
Do: Negotiate a Great Price on a Rental Property
The more you pay for a rental property, the longer it’s going to take you to begin to turn a profit on it. As a result, you should negotiate as best you can when buying an investment property and attempt to get the right deal on it.
The great thing about buying an investment property versus buying a house for yourself is that you won’t have a strong emotional connection to it. So you’ll be a lot more willing to walk away from a deal if it doesn’t work for you.
You shouldn’t be afraid to try to drive a hard bargain when you’re negotiating with someone selling you what will become a rental property. if you aren’t able to reach a deal, there will always be other income properties that you can consider later.
Don’t: Expect an Income Property to Make You Rich Overnight
There is this perception that those who buy investment properties are going to be able to use them to get rich overnight. But more often than not, this won’t be the case.
If you’re somehow able to put yourself in a position to purchase a dozen investment properties at one time, they might be able to make you your fair share of money within a few months. But if you only purchase only one property, it’ll take some time for your investment to pay off.
In the meantime, you’ll want to sit back and start looking for other income properties you can add to your investment portfolio. After you have one piece of real estate that you’re using for investment purposes, it’s never a bad idea to try to add to it over time using all the do’s and don’ts that we just mentioned.
Remember All These Things When Buying an Investment Property
Buying an investment property isn’t something that you should ever do on a whim. You should put the right amount of thought into doing it so that you’re able to find a property that’s going to pay off in the end.
The do’s and don’ts that we’ve listed here should lead you down the right path as you set out to locate a great rental property for purchase. It shouldn’t be too long before you’re using this property to pad your investment portfolio.
Contact us today to hear about how we can assist out-of-town investors in investing in Memphis real estate.