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Investing in Rental Property for Beginners: Top Tips to Note

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The real estate industry is huge and steadily booming; thus, every investor wants part of it. Hence we often get the question, “how do I start rental property investing”?. To succeed as a rental property investor, there are numerous skills and education you must possess, including research, learning, and property management.

Purchasing your first rental property isn’t an easy feat. Thus, you’ll need all the tips and help you can get. We’ve put together these top tips for investing in a rental property for beginners. With these tips, you can make an informed decision and buy your first rental property like a pro. 

However, don’t forget that you can only know everything there is to know about rental property investment when you buy a property. So, enjoy the experience. You can also check this additional Short Term Shop guide. It’ll come in handy when buying your first rental property. Let’s not waste time, though. The following are our pro tips for buying a rental property as a newbie investor:

Start by Paying Down Debt

Before investing in a rental property for beginners, we recommend that you sort out your debts. Suppose you still have medical debt, student loans, or your kids are still in college and you’re paying for their school, it’d be best to hold off on the investment. 

It’d help if you were as debt-free as possible. Otherwise, it’d be impossible to get a loan to finance your rental property investment, seeing as the lender will check your debt to income ratio.

We recommend that you budget towards buying the rental property and start to save money for it. If you’re consistent, you’ll be able to afford the investment shortly. 

Separate Business and Personal Finances

Investing your personal finance into your business has several repercussions. For one, you become personally liable for your enterprise’s financial actions. Furthermore, combining business and personal finance might lead to tax complications. 

We recommend opening a business checking account to separate your business and personal finance while limiting your liability.

Talk to a Lender

Like we mentioned before, you need to have a budget of the amount you intend to spend on the rental property purchase. After budgeting, talk to a bank or any other financial lender. 

You’ll need to get a loan pre-approval before starting your search for the best rental property. If you’re unable to get a loan, there isn’t any need to find an investment property for sale.

Do Careful Research

Even seasoned investors do careful research before buying any investment property, so as a newbie, you need to be cautious with your first rental property. 

You can look into various markets. Don’t be limited by location; there are several technological innovations recently available to aid you in operating rental properties anywhere. However, it’d be best to go for a popular area that attracts tenants, as a beginner. 

Also, carefully choose a rental property seeing as the building and location will influence your potential cap rate, expenses, cash-on-cash return, and income stream. 

Conduct Market and Investment Property Analysis

Once you’ve narrowed down where you wish to buy, consider doing a market analysis of those places. That way, you can discover the best investment property type, strategies to use, rent estimate level, and even determine the price. 

After you’ve got a few properties, it’d be best to opt for investment property analysis for the properties. This way, you discover if the property will turn in a positive or negative rental income.

Employ Real Estate Investing Tools

Due to technological innovations, handling tasks related to real estate investment properties is now pretty easier. Various calculators are used for generating invaluable data quickly, and they help even new investors make great decisions. 

With these tools, you can easily discover rental income, property price, rental income tax estimates, short-term and long-term rental cap rates, and expenses.

Find a Low-Cost Home

As a beginner who intends to buy residential investment property for sale, it’d be best to start with a low-cost home because the more expensive the property, the more the expenses over time. 

With a low-cost home, you wouldn’t have to spend too much on expenses and can easily start getting returns in a short while.

Know Short-Term Rental Restrictions

Following the popularity of short-term rental businesses like Airbnb, some areas have passed restrictions on short-term rentals. Your HOA may have regulations, such as not allowing the owner to rent the property for less than 30 days.

Thus, you’ll need to make inquiries to ensure there aren’t any restrictions in your chosen area.

Avoid a Fixer-Upper

As a new investor, it’d be best to avoid fixer-uppers. Although the idea of buying and repairing a property to sell it quickly might sound too appealing, we don’t recommend it for beginners. 

Flipping a property means you can’t use depreciation (the tax deduction made from your property costs and its improvements). Depreciation can’t be applied to houses sold in the same year it was bought.

Have a Written Lease

When you have successfully found a property you like and purchased it, you’ll need to plan the best ways to get tenants by drafting an explicitly written lease. 

That way, renters will know what they’re signing up for. Specify when the payments will be due, if pets are allowed, if the heat should be set to a specific temperature, and lease termination fees. 

Bottom Line

Investing in a rental property for beginners is often a daunting task due to the skills and industry knowledge required to make informed investment decisions.  

With the top tips mentioned above, you’re on your way to buying the best rental property. Seeing as you’re committing to spending such a significant sum on your first rental property, these tips will come in handy. 

However, don’t forget to work with a real estate agent. That way, the rental property buying process will be much easier. Avery Carl of The Short Term Shop is renowned for helping investors buy short-term rental properties. Contact her today to see available investment property for sale near me. 

The Blogger Scientist is a "Medical Physiologist" and a "Financial Asset" Content Creator who aims at enlightening web reader on varying Financial Assets such as Stocks, FX, Crypto, MLM,. HYIP among others.

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