Low mortgage interest rates, high rental costs, and affordable homes may have you thinking about purchasing your first rental property. Before you do, make sure to read through these 3 tips for what you need to know.

3 Tips for Purchasing Your First Rental Property

  1. Location, Location, Location

According to an article by Foxnews, you will want to choose a neighborhood with a history of strong rental demand.

Here are some ideas when looking at locations:

  • Pick a house in a neighborhood by a university.
  • Purchase a house close to good schools to attract families.
  • Consider condominiums or properties with home owners associations because the association arranges for the upkeep of the property. Make sure to read the fine print on your mortgage and homeowners’ association rules because sometimes rental properties are not allowed.
  • Buying a foreclosure can be a great way to get a deal, but Foxnews, reminds us to remember you may be competing with investors who are paying in cash. In addition, there may be repairs in the home that will delay the rental income.

In an article for Consumerism Commentary, Sasha, a former writer and owner of several rental properties, shares her experience when purchasing and managing residential rental properties. She recommends buying in “solid working-class neighborhoods, general middle to lower areas where tradesmen and even some businesses might reside intermingled with houses.”

Sasha also recommends purchasing your rental properties close to home. In fact, she recommends living around 20 minutes or less from your rental properties. This way, you can be a part of the local community and respond quickly when help is needed.

  1. Screening Tenants

After you have chosen the right location and the perfect house, make sure to fully screen your potential tenants. A few ways to do that include:

  • Asking for landlord references
  • Running a credit check
  • Running a criminal background check

Previous landlords will be able to tell you whether the tenant has a history of paying on time and so much more.

According to the same article published in FoxNews, experts recommend asking for a security deposit that equals one month’s rent. If the tenant has pets, you will want to ask for a little more.

Before the tenant moves in, make sure they do a walkthrough of the property and sign off on the condition of the property. This will help you to avoid conflict with the security deposit when the tenant moves out.

In an article by Luke Landes for Forbes, future landlords are reminded that even when you believe you have found the right tenant, dealing with strangers is not for everyone. Landes stated:

 “Tenants will certainly not care for your property as much as you would if you were to live there. Even nice people can surprise you in a tenant/landlord relationship. To become a landlord with a successful business, you’ll need to be able to deal with people who might be different than you in terms of values and personality.”

  1. Be in it For the Long Haul

According to an article by Zillow, if you are looking to build wealth, it is rare for people to quickly increase their wealth when owning rental properties. Owning rental properties is a long term investment. It can also generate a nice income for retirement.

Take Away

One of the best things you can do when considering buying a rental property, is to talk to an experienced real estate agent who can help you find the right property for your budget.

If you are interested in taking the next step, please give our office a call today.

248-348-7200