Buy Rental Property with These Quick and Easy Steps
Being a landlord can be highly rewarding but you have to learn how to buy rental property in first place. Discover what are the must-know steps for investing in rental property right now.
Learning how to buy rental property involves more than just grabbing the first available property and renting it to any tenant that comes along. You will have to prepare and plan for your buying process to make sure you get the perfect property for your needs. Follow these quick and easy steps to invest in real estate today.
Set Your Investment Goals Before You Begin
Understanding how to buy rental property means having a solid plan in place that you carry out to achieve your investment aims.
Come up with an investment plan based on your goals. If you want to rent out your property for the long run, you will be looking for a healthy cash flow instead of just a cheap price tag.
If you plan to rent the place as a stop gap measure, you can consider buying a cheap fixer upper to renovate while waiting for the house to appreciate in value.
How Much Can You Afford for Your Rental Property?
Determine ahead of time how much you can afford to pay. Do a good cost analysis based on property maintenance requirements, typical rents in the area, vacancy rates and so on.
Are you able to handle simple property repairs by yourself? If not, you should add another 5 to 10% to your estimated maintenance cost. Naturally a brand new rental property will rack up less maintenance costs than one which has seen better days.
Decide if You Want to Hire a Real Estate Agent
While you will have final say in whatever property you choose to buy, a real estate agent can be invaluable in providing professional advice on how to buy rental property. An experienced agent can also empower you with far more negotiating leverage than you would have on your own.
Get Yourself Pre-Approved for a Rental Property Loan
Before you go shopping for a rental property, you will have to get yourself pre-approved for a mortgage loan. This means finding a lender who is willing to grant you financing for your property investment in advance.
On the other hand you can choose to work with a good mortgage broker. You’ll know just how much of a down payment will be coming out of your pocket and you’ll have better negotiating leverage since you’ll know exactly what your bottom line is.
Now it’s Time for You to Shopping for a Property
Now you’re ready to look at properties. For every property you evaluate, you’ll want to consider:
- The cost of necessary repairs: Can you afford to keep it up?
- Location of the property: Is it likely to stay occupied?
- Neighbourhood rental rates: Are they profitable relative to the property price?
If you are looking for ready rent, you can look for a rental unit that’s already occupied by long term tenants. You may also want to consider buying a multi-family unit and living on-site. This way your rental income may cover the whole mortgage and allow you to live virtually rent-free. It’ll also be easier to monitor and maintain the property if you live on site.
Negotiate with the Property Seller and Close the Deal
Negotiate wisely. The seller may be willing to pick up some or all of the closing costs, depending on market conditions and the seller’s own financial situation. Remember that you have more bargaining power in a saturated market and less when supply is down.
Make sure you have the property inspected. Even if you’re buying a fixer upper, you don’t want to be surprised down the road with a major and unexpected problem. Having the property professionally inspected can’t guarantee this won’t happen, but it can certainly help.
As you can tell, learning how to buy rental property involves having a solid plan and knowing what to do every step of the way. Make sure you do your homework and go into a deal with your eyes wide open.
Teo Zhenjie has been showing landlords how to manage their tenants and rental property effectively on Propertydo Landlord Guides. Visit his website for step-by-step real estate guides, free resources and forms.
By Teo Zhenjie
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