Are you dreaming of purchasing your first rental property? Real estate investments can be a good way to pad your savings and secure your finances, but buying your first piece of property can be a major process. So, be sure that you are fully prepared for the risks, rewards, and responsibilities of owning investment property by answering these crucial questions.
How Will You Keep Your Investment Protected?
When you think about protecting your real estate investment, are you thinking about finding the right location for your property or finding the right security system? Ideally, you should be thinking about both, since checking these items off of your list can ensure maximum returns on such a major investment. Choosing the right location, from the city to the neighborhood, is important for ensuring that there will be interest in renting your property. Once you have a location and home picked out, you will also want to ensure it stays protected whether occupied or not. A quality home security system can do just that, but don’t just think about tech when it comes to securing your property. While an alarm system can certainly be a smart security option for any home, you need to understand both the upfront and continual costs of such a system. Having an alarm system installed will run you around $675, but you may also need to pay for monthly fees if you opt for monitoring. So, look for security options that provide protection but are both low- and high-tech, like monitored systems and protective landscaping.
How Will You Finance Your Purchase and Maintenance?
If this is your first time investing in real estate, you should know that along with perks of owning a rental property are some serious challenges. Using online guides like this one can help you overcome the challenge of being a novice real estate investor, but you also need to know how to secure financing for your investment property. Getting a loan for a rental property is very different from securing one for your primary residence, so you may need to save up more money for a down payment or you need to work on your credit before you can qualify for a loan.
Once you have figured out a way to pay for the initial purchase of your investment property, however, the expenses are not quite over. If you buy a fixer-upper, for example, you will need to find additional financial resources to help out with any needed repairs or updates. In addition to initial repairs, you will also need to make sure you can cover any routine or surprise maintenance costs for your new property. So, factor these property expenses into your budget.
How Will You Manage and Maintain Your Investment Property?
Do you feel comfortable marketing your rental home to potential tenants or receiving maintenance calls in the middle of the night? If you answered “no” to these questions, then you need to think about whether hiring a property manager will be your best option for managing your rental and taking care of any maintenance issues. By hiring a property manager, you can take yourself out of these stressful situations and still earn a comfortable profit on your investment property. Of course, many people opt to forego this step because they don’t want to deal with the extra fees that come with hiring a property management company. It can also be helpful to have a few tools and resources for self-managing your home. Self-managing a property is always easier if you live nearby, so consider a property manager if you do not. You may even be able to deduct management fees from your taxes in certain situations.
Buying your first investment property is such a big decision, one that can have an impact on your finances and your quality of life. So really take the time to weigh your options for buying and managing a rental property, so that you can make the best choices for protecting your ROI. Because ROI is crucial when it comes to owning and managing a successful rental property.