Purchasing Your First Rental Property
Posted by Shawn Simpson // February 19, 2020
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Investopedia
talks about real estate, “Real estate has produced many of the world’s
wealthiest people, so there are plenty of reasons to think that property is a
sound investment. However, experts agree, as with any investment, it’s better to be well-versed before
purchasing your first rental property with hundreds of
thousands of dollars.”
Purchasing Your First Rental Property
- Purchasing your first rental
property to earn income can be a risky venture. Go into this business
having read everything you can on real estate investing.
- Similar to purchasing a home,
buyers will usually need to secure at least 20% downpayment for the
property. There are ways to get 100% financing but you will need a
list of private investors.
- Being a landlord requires a
wide range of skills, which could range from understanding basic tenant
law to being able to fix a leaky faucet.
- Experts
recommend having a financial cushion, in case you don’t rent out the
property, or if the rental income doesn’t cover the full mortgage on the
property. That also means that you pay off personal debt.
Six Red Flags With Any Rental Property Purchase
- The
deal isn’t within your budget. As
the real estate market fluctuates and shows more favor to sellers, it’s
tempting to spend more cash on deals you would otherwise pass on. While the
market does shift, numbers don’t lie. If you can’t afford to take the
investment risk, don’t do the deal.
- The
asking price is too low. Properties
in certain areas may carry a lower list price because there’s a motivated seller or there are other issues like needing
costly repairs or structural damage that would drastically cut the property’s
value. If it seems like too good of a deal, it probably isn’t or needs more investigation.
- There
are gaps in the title. If
you spot irregularities and discrepancies with the property title, the
likelihood of the investment going through shrinks, if it’s unclear who actually owns the property according to tax
records or if the owner isn’t the person trying to sell the property, you may
not be able to secure title
insurance.
- It’s a stale listing. If the property has been sitting for a while, you need to find out why. Properties
that have spent years on the market likely present a challenge that other buyers
didn’t want to tackle. Do your due diligence and investigate the property
thoroughly before entering a deal.
- A high number of vacancies. For multifamily properties, a high
vacancy rate is often a symptom of a more significant challenge. Speak with the
tenants and neighbors of the area to get a feel for possible issues.
- The
local economy is on a downturn. What
has happened in the market over the last few years? If the census shows the
population is dwindling, jobs are becoming more scarce, or the local government
isn’t investing in roads and infrastructure, it may be challenging to sell or
rent the property. Consider how attractive the market is as a whole, not just
the investment property.
In
Summary:
Keep these six red flags in mind as
you Investigate any rental property purchase. Do your due diligence to
protect your investments and partner with a closing firm that has
your best interest in mind.
Styl Properties, Inc. is here to help homeowners out of any distressed situation.
As
investors, we are in business to make a modest profit on any deal. However, we
can help homeowners out of just about any situation, no matter what!
There are no fees, upfront costs, commissions, or anything else.
We offer the simple truth about your home and how we can help you sell it
fast.
Give
us a ring. We would love to help you understand the process and to answer all
of your questions. You can reach us at 402 999.0577.
Photo by Bernard Hermant on Unsplash