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How to Successfully Buy and Manage Your First Investment Property

How to Successfully Buy and Manage Your First Investment Property

 

Real estate can be a great way to earn passive income when handled successfully. As with all other forms of business, renting a property takes a lot of energy, investment, and patience. There’s a learning curve which many people aren’t willing to wait out. This leads many people to fail in real estate and property management. But don’t let these outliers scare you off from the potential benefits of this market. If you’re willing to put in the work, investment, and effort, you can end up generating a substantial income from renting real estate. It all starts with that first property. Here is a starter explanation on how to successfully buy and manage your first investment property.

Key factors to consider when purchasing rental property.

Before you can start counting the monthly income from tenants, you have to find a property to rent out. When choosing your first investment property, there are some important factors to consider. First and foremost, you have to determine the location of the home or apartment. If the property is too far away, it will become much more difficult to manage and oversee. Finding something close to your current home is much easier.

If you decide to go with a vacation rental, buying a home in a prime location is also important. Wherever you choose to purchase a vacation rental, staying close to popular attractions is a must if you want to bring in a steady flow of income.

Once you’ve located a potential property in a good location, it’s time to hire a home inspector to take a look (a home inspection in El Paso averages $232). If the home passes inspection, you can start doing the math on how much you can charge per month. You should factor in the costs of updates and other property expenses that you’ll incur. For example, if you need to add a home security system, monitoring services average $15 to $35 a month. The rental price should be low enough to entice tenants to rent yet high enough for you to earn an income.

Figure out who will be managing the property.

Renting out property may not be as involved as a full-time job, but it still requires some active effort. Somebody has to be placed in charge of managing the property to ensure that nothing goes wrong. This individual will deal with the tenants directly to take monthly payments, field complaints, and fix issues when they arise with the rental property.

If you’re fortunate enough to live near your rental property, you can take care of these duties. On the other hand, you may have to hire a property manager if the rental is too far away or if you don’t have the time to deal with issues. It’s an important factor to consider as hiring an extra hand will diminish your monthly income, but finding a property manager that takes care of housekeeping, ID screening of tenants, and online bookings will make managing your property easier.

Treat it like a business.

Many property owners are tempted to see their position as a landlord as a side hustle or a hobby. This is an especially inviting perspective for those who are working a full-time job and renting a property. Regardless of your current occupation, it’s crucial that you manage your first investment property as if it were a business. When people approach real estate as a hobby, they’re more likely to take risks and slack off.

Every investment put toward your first investment property should be compensated for by a future return. In other words, don’t sink money into the property that you don’t foresee adding value in the long run. It’s also important to keep accurate records of the property and interaction with the tenants. You’ll want to keep track of all your costs (repairs, maintenance, etc.) and income (rent) to make it easier to create a balanced spreadsheet

Buying and managing your first investment property is an exciting endeavor. If you can push past the obstacles you’ll face in this market, you’ll be able to find success where many others fail. As long as you take the investment seriously and manage it actively, your first rental property should be a successful one.

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Brian Burds

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