A well-maintained rental property in a desirable area stands to turn a healthy profit in a timely manner. However, as any experienced property investor can attest, not all investment ventures are going to prove equally beneficial. In fact, failure to do your homework is likely to result in a bad case of buyer’s remorse down the line. Considering how much capital is at stake with most rental property investments, you’d do well to approach your first property purchase with caution. First-time investors looking to avoid regrets would do well to consider the following pointers.
Research Local Rental Rates
When it comes to mistakes to avoid when investing in real estate, few can prove more damaging that failing to research local rental rates. For example, if you invest in an expensive rental property in an area with traditionally low rents, there’s a good chance you won’t see the desired return on your investment. By the same token, if you spend a fortune renovating a well-worn rental property in a low-demand area, you may find yourself similarly disappointed.
That being the case, you stand to save yourself a considerable amount of time, resources and stress by researching local rental rates before proceeding to invest in a property. This will provide you with a solid understanding of the types of rents properties like the one you’re thinking of investing in are able to command in a given area. Depending on what you discover, you may ultimately decide to seek out rental properties in areas with higher demand.
Purchase Landlord Insurance
When looking to insure your first rental property, you may assume that a good homeowners insurance policy will do the trick. However, since homeowners insurance can’t be applied to properties that aren’t inhabited by their respective owners, you’ll need to buy landlord insurance instead. Among other things, landlord insurance will provide you with liability protection, coverage for property damage and reimbursement for lost rental income. In the interest of maximum protection, make sure to encourage all of your tenants to purchase renters insurance.
Determine How Much Maintenance a Property Will Require
Depending on the size of a rental property, a high level of maintenance may be required. For example, when it comes to apartment buildings and complexes, full-time maintenance personnel are often needed to tackle problems as they arise. The more units a property has, the more opportunities there are for problems – and the more maintenance the property is liable to need.
Alternatively, a single-family home is unlikely to require anywhere near the same level of maintenance as multi-family properties. In fact, if you’re fairly skilled when it comes to home improvement, you may even be able to fulfill most of your tenants’ maintenance needs on your own.
Be Thorough When Screening Rental Applicants
If you regularly take on tenants that are unable to keep up with rent, your income is likely to be adversely impacted. To avoid this type of situation, make sure to thoroughly screen every prospective tenant who submits a rental application instead of simply going with your gut. For best results, run a credit check on each applicant, confirm their income and contact any references they list. Taking the time to carry out these tasks stands to save you a lot of headaches down the line.
Carefully Inspect the Property Before Buying
Purchasing a rental property that hasn’t been thoroughly inspected is practically asking for trouble. Even if you’re being offered a considerable discount, you should never purchase a property sight unseen. Any property you’re giving serious thought to purchasing should be carefully inspected by knowledgeable, experienced building inspectors, plumbers and electricians from Bel Air. In addition to documenting glaring issues, these individuals will be able to identify problems that would typically elude nonprofessionals.
Once these inspections have been completed, you’ll have a much better sense of what kind of investment a property represents. Additionally, if you’re still interested in making a deal, the discovery of problems stands to increase your bargaining powers.
Rental property investment is among the most popular sources of passive income. However, there’s a lot more to seeking out the right properties than many first-time investors think. And as many disappointed property owners have discovered, failing to do your research in advance of purchasing a rental property can lead to massive regret. Needless to say, with so much money in play, you’ll want to do everything in your power to avoid buyer’s remorse. To help ensure that your first rental property doesn’t become an investment you regret, make good use of the tips discussed above.
