Buying your first Pocatello single-family rental property can be a fascinating experience. However, comparable to several investments, there are some risks involved. To ensure that your first investment property purchase in Pocatello becomes as profitable as you hope it will be, there are a lot of requirements that must be fulfilled before you buy. For example, you’ll need the answers to questions like whom do you want to rent to? What type of rental property will you put more emphasis on? How will you finance your purchase? In what follows, we’ll talk about these issues and other important things you’ll need to know to make buying your first rental property a rewarding experience.
Define Your End Goal
When buying your first single-family rental home, one of the first considerations to keep in mind is to set clearly defined end goals. Before you start your property search, you should take some time to think about what qualities you are looking for in your investment property. Let’s say you might be searching for properties in a particular area with a specific number of bedrooms or minimum square footage. You can also concentrate on an individual renter demographic, such as college students or retirees. When you understand every aspect, you can refine your search criteria and locate potential properties more quickly.
Prepare Your Finances
Additionally to knowing what qualities you are seeking in a property, it is recommended to prepare financially before you get an investment property. Industry experts recommend paying down personal debt and saving for a down payment before commencing your property search. Reduced personal debt can help you to qualify for better loan rates, while nearly all mortgage loans for an investment property will require a 20% down payment. Preparing to finance in advance is another critical step, but be alert for high-interest loans or mortgage products that seem too good to be true. By prequalifying with a trustworthy mortgage lender, you will be able to make the most of investment opportunities when they come up. By prioritizing financial readiness, you can buy that rental property with more confidence when the time comes.
Crunch the Numbers
After taking these essential preliminary steps, the search for the best property begins. One important task to remember during your search is that you should run a series of numbers on each prospective property, such as your margins, operating expenses, and expected return. This is where many new investors commit bad decisions.
For new investors, keep in mind to include all the expenses related to purchasing and preparing the rental property for lease, as well as ongoing property management, maintenance, and vacancy costs. Industry experts suggest a margin of 10% and a 6% return in your first year means you have a profitable investment.
Stay Objective
You should always remember that an investment property is just that, an investment. Getting attached to a particular property or letting your emotions affect what you do is not an excellent idea. What’s more, the property you buy is not necessarily one you would ever live in yourself. Industry experts recommend choosing low-cost properties in high-demand areas for your first investment. But avoid fixer-uppers unless you are a highly skilled home remodeling expert or know a quality contractor who will do the work for less than the going rate. Your first single-family rental property should be viewed as the first step toward a long and profitable investment career rather than the end goal. In this way, you can keep yourself on track and your investment properties in the black.
Design a Management Strategy
Finally, keep in mind that buying a rental property is just the first step. To guarantee your investment will be profitable, you need a proactive management strategy. This is why it can be beneficial to hire a Pocatello property management company. As local market experts, property managers can help you locate off-market investment properties, analyze market conditions, set rental rates, and do a lot more. As more experienced investors will tell you, the ideal property management company is an important partner in money-making rental property investing.
If you have discovered the right investment property, make sure you select the ideal Pocatello property management team. Contact Real Property Management Pocatello at 208-234-1000 today.
Originally Published on March 13, 2020
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