If You Think You Can’t Afford To, Think Again
Posted on July 31, 2018 by STUART SIMONE
We strongly believe that owning rental properties is the best way to earn wealth. Where else can you earn money from rent, get tax deductions, and earn money from appreciation, without lifting a finger? That’s passive income folks! While rental properties make great investments, you need to know how to get started with rentals if you’re going to do it yourself. Investing in rental properties is far different than flipping or wholesaling.
Most people that intend to invest in rental properties never buy even a single property. This is often due to many different reasons including time, money and lack of education. There are many parts to finding and purchasing the right rental properties. Below, you’ll find a quick guide to help you get started with rentals. After you read this article, you may have a new-found appreciation for “Turn-Key Rentals” such as those we provide, as we take of all these steps for you. All you need is the cash.
It’s a Business, Not a Hobby
Before you start investing in rental properties, you need to understand it’s a business, not a hobby. If you treat it as a hobby, you’ll likely fail**. However, it you treat investing in rental properties as a business, you’ll
have a much better chance for success.
**Unless of course you invest with a Turn-Key Rental Property company like Cleveland-Rocks; if you do that, aside from paying property taxes and such, everything will be taken care of for you. This article shows you the list of things that we take care of for you.
Where to Start with Rentals
Investing in rental properties can be rather overwhelming when you’re first starting out. You may not know where to start at all. The first step is to figure out everything you will need to do and write it down. Create a
list of all the necessary tasks, such as:
- Speaking to a lender
- Finding houses to purchase
- Finding local contractors
- Getting a good insurance agent
- Registering your business
- Opening a business bank account
- Research your market area
- Attending classes/workshops for more education
This is just a short list of all the things you will need to do. You may also need a real estate agent, attorney, property management company and a few other contacts to add to your team.
Once you have a list of everything you must do, break it down into a step-by-step format. You will need to prioritize each step to ensure you’re doing things in a sensible order, as well. As you learn and get closer to
investing in rental properties, adjust your task list.
1. Buying Your First Property
Once you have an idea of the tasks you must do before purchasing, it’s time to find the right property and invest. As a beginner, it’s a good idea to start small with a single-family home or a smaller multi-dwelling
property. Starting with larger properties will require a larger down payment and could cause more stress.
When you purchase your first property, you want to keep the maintenance and association fees to a minimum. Don’t choose a property with elaborate landscaping, at first. Keep it simple and get your feet wet
with a property you can easily manage.
2. Getting the Property Ready to Rent
Once you’ve closed and the home is yours to rent, you need to make sure it’s ready to rent. If you’re lucky, you’ll find a turnkey home you can rent immediately. If not, you may need to fix a few things and replace a
few items to get it ready to rent. A good handyman will go a long way if you want to buy rental properties that aren’t perfect.
Make sure the carpet is clean, the home smells good and everything works. Think about what you’d want if you were considering renting the property. All appliances should work, along with the plumbing and electric.
Of course, everything needs to be up to code, too.
You should have had the home inspected during the buying process, which will give you a good idea of the work needing done. Outside of what the inspection showed, you may also want to look at different cosmetic
features, such as carpet, paint and landscaping before you rent the home.
3. Setting the Rent
After you’ve found and purchased the right property, you need to set the rent and get a tenant. The amount you charge needs to match up with what the market it currently supporting. You cannot just set the rent to
cover your mortgage payment.
Rent needs to cover your mortgage payment, taxes, insurance and maintenance. It’s smart to assign 5% of the gross rental income to cover maintenance and another 5%+ to cover any vacancies or downtime.
4. Get Professional Help
The worst thing you can do when investing in rental properties is try to do it all yourself. When you need professional help, get it. You may want a real estate attorney to create a good lease for you and you probably want to learn the rights of tenants before you start renting. It may also be a good idea to have an accountant on your team, along with skilled workers, such as electricians and plumbers.
If you plan to invest in multiple rentals, hiring a management company to handle all of your properties may be a good idea. You may want to manage your first few properties on your own, but once you become
overwhelmed, it might be time to hire a management company.
5. Market the Property and Find a Tenant
You can market your rental property in many different ways from taking out an ad in the local newspaper to putting it up on Craigslist to using a management company. Put a sign in the front yard and choose a few
ways to market your property to find the right tenant. If you want to rent to college students, find out if the local college has a newspaper. This could be a cheap and easy way to advertise the property and get it rented fast.
6. Keeping Tenants Happy
Once you’ve gone through the process of purchasing a home, setting the rent and finding a tenant, you need to keep your tenants happy. Successful landlords know how to keep tenants living in their properties for a long time. Make sure they get what they need and want and treat them like your customers.
This simple guide will get you started with investing in rental properties. However, you should continue to educate yourself with workshops and classes to ensure you know the best strategies to buy and rent
properties in your area.
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