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There are many reasons to get into real estate investing. For example, many individuals turn to real estate because it offers the allure of a reliable source of income with very little investment of time and effort. This guide, presented by Realty with Rich, can help walk you through some of the steps involved in purchasing and managing your first investment property.
Understand the Risks
While real estate is generally viewed as a safe investment, there are risks. For example, you’ll need to cover your property’s costs even if it is not generating income. There are several reasons an investment property may not produce a return. For example, you may need to do repairs before you can sell or rent it, experience a lag between tenants, or find yourself in the gray area of selling a house with tenants in place.
There is also always the possibility that your tenants will fall behind on rent no matter how well-meaning they are. In addition to missed rent, you may need to cover the costs associated with an eviction and any necessary repairs afterward.
Look Beyond Single-Family Homes
Many beginning investors gravitate toward single-family homes; however, they are not your only option. Be careful to weigh all of the available properties, even if the jump to a multi-family one seems like a big move. Yes, you’ll likely need to put down a larger down payment and take a larger risk with a multi-family property, but the opportunity for profits is also much greater.
Multi-family properties can mean a lot of different things. You might consider buying a duplex or single-family home with an accessory dwelling unit (ADU) to get started; this gives you the chance to live in one unit and rent out the other. Or, if you own your home, you might consider adding an ADU to your back yard. Larger buildings with apartments or condominiums offer a greater income potential but also come with increased demands on your time and resources.
Evaluate Your Financing Options
While you may be able to secure a traditional home mortgage for your investment property, that might not be the best solution. Hard money lenders, private investors, business loans or equity lines are other options that might be better suited to your situation. According to the experts at Rocket Mortgage, it is a good idea to secure a preapproval letter before you start shopping for an investment property if you decide to stick with a conventional mortgage.
Be Prepared for Day-to-Day Management Tasks
There is a lot of work involved in managing a rental property. If you decide to venture into multi-family properties, then you will have even more on your plate.
A few of the basics include:
- Routine maintenance
- Repairs and upgrades
- Landscaping
- Pest control
- Collecting and tracking rent payments
Many investors choose to work with a property manager whose wealth of knowledge will save time and effort in the long run. He or she will handle everything from showing the property to prospective renters to collecting rent payments and arranging for repairs or maintenance. That frees you up to focus on other things you would rather be doing – like enjoying the extra income.
Real estate investing can be both profitable and rewarding. Weigh the risks and potential benefits before making any hard decisions. Then, take time to research your financing options and find one that fits your situation. Finally, be prepared for the work necessary to maintain an investment property. If you follow these steps, you’ll be on your way to a property portfolio.
Realty with Rich can help you along the way, To request a free, no-obligation consultation, contact us by calling 833-442-SELL.