6 Tips For Rental Property Investing
Looking for tips for buying rental property? Check out these 6 tips to support you when considering purchasing your next rental property in San Diego
1. Choosing Your Strategy
Choosing what type of rental property you would like to invest in so you have a clear strategy is the first step.
Are you interested in single-family properties, multi-family properties or commercial properties? Managing a commercial property with many tenants is very different than managing a single-family home with a single household tenant.
Before you start investing, find out what direction you would like to go. Speak to other investors or landlords to see the cost of investing, the time commitment and the possible issues that arise that need to be managed on a daily, weekly and monthly basis. This way you have a clear idea of what you are taking on before jumping head first.
2. Know Your Expenses
There are several expenses that go into owning investment property. If you are looking to invest in residential property, you may want to consider a property manager to manage your property. Besides property manager fees, you will need to pay property taxes, rental property insurance, cover utility bills and routine or unexpected maintenance that might come up. When your property is vacant, you will need to consider what the cost is when you aren’t earning income.
Don’t overestimate your rental income. Check out rentals in the area that you are considering purchasing and compare the square footage, number of beds and baths. If you are still unsure, reach out to get a professional opinion from someone in the industry.
3. What Is Your Cash Flow Criteria
Do you know what your cash flow criteria is? Determine what your criteria for cash flow is based on what your financial goals are. Cash flow should be your top priority when considering investing in rental property. Although buying investment property can benefit you with tax advantages and future appreciation, cash flow is the biggest asset!
1. The Right Market
Certain areas of the country can be experiencing different market trends at any given time. Make sure to speak to a real estate professional or do your own due diligence to make sure you are buying in the right market. Before considering purchasing a rental property, see if you can get a rental analysis from a local property management company. Property managers that have their pulse on rental rates and are able to provide this information to you as an investor, are a company worth considering managing your property.
Don’t buy an investment property just because it is cheap. You may not be able to find qualified tenants or collect the amount of rent that meets your financial goals. Ideally, you want to buy investment property in a highly desirable area.
Keeping a maintenance and emergency reserve is highly recommended when purchasing investment property. Some property management companies will even indicate on their agreement where you can set a maintenance reserve amount. This amount helps you set aside funds to address repairs and outgoing maintenance for your property. 10% of the monthly rental income for reserves is a good start. This percentage may change depending on the age and condition of your property or recurring issues if you don’t manage maintenance effectively.
3. Managing Your Property The Right Way
If you talk to any landlord, it is not an easy task to manage a rental property. Once you have fully readied your property for new tenants to move in, you need to deal with marketing, showings, screenings, lease agreements etc. This can be a full-time job for someone, especially if you own or are considering owning multiple rental properties.
You can manage your investment property yourself, or you can consider hiring a reliable property manager. Whether you end up managing your own property or hiring someone, make sure that your property is being managed the right way to ensure your investment is taken care of.