If you are considering purchasing rental properties, it is important to know where to start. Buying a property can be intimidating, but buying your first rental property will be easier than ever if you follow these five steps.
Determine What You Want to Buy
It is important to know whether or not you are looking for a single-family home, duplex, townhome, or apartment building. You will also need to determine if you have any preferences as far as location goes. For example, do you plan on buying properties in the suburbs where there are more children and less crime? Determine what you want to buy before you start looking around. This will save time and energy in the long run and make sure that whatever property you purchase is going to be a good investment.
Assess Your Credit
It is important to have a good credit score in today’s economy before you start shopping for rental properties. If your credit score is bad, some options will allow you to purchase property even if you don’t qualify on paper. For example, mortgages with low down payments and monthly mortgage insurance may be the best option for you. If your credit score is good, it will make the process much easier and faster to purchase a rental property because lenders are more willing to work with people who have an established history of paying their bills on time. As long as your credit score doesn’t fall below 620 or so, you should be able to find financing to purchase a property.
Get Your Taxes in Order
When you purchase a property used as an income-producing asset, it is wise to obtain the necessary tax exemptions. In some cases, there are areas where people can save up to $14,000 a year just by purchasing rental properties and obtaining certain tax exemptions like Section 42 of the Internal Revenue Code.
Consider the Down Payment
Many people believe that when they purchase rental properties, their investment will grow quickly and all they have to do is wait for a few months. This couldn’t be further from the truth! It’s important to consider how much money you’re putting into your property upfront – this includes not just the initial cost of purchasing it but all the other costs you’ll be taking care of along the way.
When it comes to rental properties, money talks. If you’re looking for a place in your budget, make sure that property is really what you want before signing anything on documents. You don’t want to end up with few options because money is your asset when investing in real estate.
When it comes to property management, sometimes you want to be on-site and responsible for scheduling repairs or other maintenance. Other times, you may want a company that is professional in this field to do all of these things while you sit back and relax with your rental income coming in. It’s important to weigh how much time you want to spend managing your rental property and what you want to pay for the management service.
Owning rental properties can feel overwhelming at first. However, by following the correct steps everything will run smoothly and you will be successful.