4 Tips for Buying Your First Rental Property

    4 Tips for Buying Your First Rental Property

    If you’re interested in real estate investing, rental properties are a good place to start. They’re plentiful and, under the right circumstances, can provide a pretty nice return on your money. Best of all, they have the potential to become fairly passive streams of residual income.

    Why Invest in a Rental Property?

    When it comes to real estate investing, you can go any number of directions. You can invest in real estate investment trusts (REITs), lend money as a hard moneylender, flip houses, buy raw land for long-term holding, invest in commercial or industrial properties, wholesale, etc. But for the first-time investor with limited resources, residential rental properties are arguably the best option. Here’s why:

    • (Semi) passive. While a rental property requires some work on the front end, you can turn it into a fairly passive stream of income. (If you play your cards right.) This may allow you to generate several hundred to several thousand dollars per month for a relatively low investment of time and energy.
    • Dual returns. With rental properties, you have the potential for dual-sided returns. Not only do you get the monthly cash flow from rent, but the property should appreciate over time. If you ever decide to sell it, you may be able to earn some money off the top.
    • Tangible. There’s nothing wrong with investing in stocks or bonds, but there’s something about owning a physical asset that provides some sense of assurance. Real estate is something you can touch and feel. It’s not going to disappear overnight. Plus, it’s a finite resource. They don’t make any more of it, which means it’s going to become more valuable and prized over time.

    4 Powerful Tips

    As a first-time rental property investor, you may find the following tips helpful as you learn the ropes and seek to maximize any opportunities that come your way:

    1. Become a Full-Time Student

    The best real estate investors in the world are also the best students. They’re constantly learning and soaking up knowledge from as many people and sources as possible. They know that they don’t know nearly as much as they think they do – so they commit to devouring any teaching or instruction they can get their hands on. This includes days, nights, weekends, and even holidays. If you want to boost your game, you need to commit to being a voracious learner.

    2. Network Like Crazy

    So much of real estate is who you know – not what you know. And if you’re first starting out in the industry, you probably don’t know a ton of people in the space. So now is the ideal time to get out there and network. Join local investing clubs, Facebook groups, and networking coalitions. Get out there and meet people. Ask questions, listen, and learn. You never know when a connection could come back to help you land a deal or secure financing.

    3. Don’t Do it On Your Own

    No matter how smart or ambitious you are, don’t try to do real estate investing on your own. There’s power in building a team. Your team might be small in the early days, but it’ll grow as you expand your portfolio.

    One suggestion is to hire a property management company. This will free you from the day-to-day tasks of managing your properties so that you can focus on the bigger picture (like sourcing more deals).

    4. Buy Local

    While some would disagree with this assessment, it’s best to stay away from properties that are not local to where you live. You might find a deal 300 miles away, but it’s hard to maintain full control over your investment if you can’t drive by it and see the property in person. By investing in local rental properties, you give yourself more leverage to handle situations as they arise. (You also know the area, which means you’re less likely to invest in a property in a declining neighborhood or market.)

    Full Speed Ahead

    Real estate investing is something that you can only truly learn through experience. You can read books, listen to podcasts, browse forums, and even network, but you’ll never learn how to become a successful investor without action. Prepare, do your due diligence, and then dive in. You’ll take some lumps, but you’ll look up in one year, three years, or five years and be glad you took action.

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