Buying Your First Investment Property: Tips and Advice
Picking up an investment property can be a great avenue toward steady passive income, but tracking down the right house takes a little homework and planning. From getting to know neighborhoods to picking the right renters, here are a handful of tips to think about before diving in:
Choosing the Right Property to Buy
Before locking in on a specific area, spend a little time driving the neighborhood at various times of day, and pay attention to how many places are sitting empty. You aren’t just looking for any warm body to fill the unit; you want dependable renters who will look after the house and yard, send rent in on time, and ideally stick around long enough that you aren’t right back screening applicants. Fairway Independent Mortgage points out that it is wise to steer clear of fixer-uppers unless you really plan to pour both time and money into renovations after closing; aim for something close to move-in ready, so you can list it for rent and start generating income sooner.
Financing the Purchase
Much like shopping for a primary home, Zillow recommends that you get pre-approved for a mortgage before you ever start touring properties. It is the clearest way to know what you can actually afford before making an offer. Be sure your down payment is set aside as well, so you are ready to act the minute the right property shows up. Your lender may also suggest having a cushion of a few months’ worth of payments tucked away, just in case finding a tenant takes longer than planned, or some unexpected expenses crop up.
Managing the Rental
Once you have a property in hand to rent out, you’ll need to decide whether to be a hands-on landlord or hand things over to a property management company. Even if you handle most repairs and routine upkeep yourself, projects will pop up that are outside your wheelhouse, like big-ticket items such as HVAC. It pays to line up reliable local service providers ahead of time and keep them on speed dial.
Running a rental is no small undertaking, and the 9% to 11% of rent that goes to a management company can absolutely be worth it, particularly if you already have a full-time job soaking up your hours. You skip the day-to-day stress of dealing with renters, and the company will even screen prospective tenants to confirm they are a good match. Property managers also take care of upkeep, make sure rent comes in on time, and help keep your pricing in line with the market.
Lining Up Home Insurance and a Warranty
If you want to be financially covered in case disaster strikes, you’ll want to take out home insurance for your investment property. Your premiums will be shaped by the home’s location, age, and condition.
A home warranty can shield you from the cost of surprise repairs, making it a smart addition for any property owner. Among its perks are peace of mind and a lot less day-to-day stress. By picking up a warranty, you are also protecting your investment and helping ensure the property stays as profitable as possible for the long haul. When you are shopping for the best Florida home warranty, focus on companies known for solid customer service and generous coverage limits. Reading reviews online and comparing pricing across providers makes the process much easier.
Stepping into the role of landlord brings its own mix of challenges and rewards. Set yourself up to succeed by doing your homework before you buy. Keep the property in great shape so tenants stay happy, plan for the unexpected, keep building equity, and don’t skip that home warranty.
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Written by: Charlotte Meier