Buying a rental property is one of the best ways to earn passive income, but where do you start?
Many people have a hard time learning how to buy rental properties. While the process can seem tricky, it’s as simple as figuring out what you want and how you’ll pay for it.
When you learn how to buy one, you can enjoy many financial benefits that most people don’t have. To make things easy for you, we’ll outline all the info you need to know.
Read on to find out how to buy rental property like a pro.
Get Rid of Personal Debt
When it comes to buying rental property, one of the first things you must do is get rid of your debt. While many people see this as a challenge, it should be done if you’d like to avoid a ton of financial problems later.
Getting rid of personal debt will not only help you determine whether you’re ready to buy a property, but it’ll also make it easier to get property loans. If a lender sees that you’re responsible, you’ll get better deals, ensuring you save money on interest.
To start the process, focus on paying off any debt with the highest interest rate. While doing that, you can make minimum payments on other debts.
Scout Properties in Different Locations
After your debts are paid, you can start looking for properties in different areas. This step is crucial because you’ll need to get a better understanding of various markets to help you figure out which one suits you.
If you’re looking to buy your first rental property, it’s best to buy one in an area you’re familiar with. However, providing you get enough info about a location, you shouldn’t have a problem finding a good property.
Some of the main things you should look at are property taxes, local amenities, transportation, and crime rate. Aside from that, you should look at the properties themselves to see how they compare to those in other areas.
Decide Whether to Buy or Finance
The next thing you must do is decide whether to buy or finance your first rental property. If you don’t have much money, your best option will be to finance a home. Not only will this prevent you from paying a large sum at once, but you’ll have an easier time getting a property.
If you can pay with cash, you’ll end up paying less than what you would with a mortgage. You’ll also increase your monthly cash flow because the rent won’t be going toward mortgage payments.
Yet, the main downside is that this will require you to save up all of the money, which will take some time. If getting experience as soon as possible is your main concern, you can go with a mortgage and make larger payments as you save money.
Choose a Property
When you’ve decided how you’ll acquire a property, all you must do is figure out which one you want. Providing you’ve spent some time researching properties in different areas, you’ll have no problem choosing one.
Knowing how to buy a rental property is a simple process, though you should take your time to avoid getting something that doesn’t satisfy you.
Before choosing a property, think about how much you’d like to earn from it. This will help you decide which type of property is right for you. For example, you can get a higher monthly cash flow with a more expensive property.
Hire a Property Manager
After buying a property, you should consider hiring a property manager. Property managers can take care of a variety of things to help you maintain your property, including payment collection, damage repair, evictions, and more.
Like any investment, you should only hire a property manager when you know you’ve found one that can offer everything you need. Vet various property managers to learn about their past experience, then you can determine which one suits you.
Keep in mind that property managers can help you with various properties. If you decide to start expanding, you can have the same manager handle each property. However, the more properties you get, the harder it’ll be for a single manager to handle everything.
Slowly Expand
Expansion is a common route that many real estate investors take. After getting some experience with your first rental property, you’ll have a much easier time buying another one and kickstarting things.
Buying more properties can provide you with a plethora of benefits, so you should think about it if you find success with your first one. As you acquire more properties, you’ll continually increase your passive income.
When buying another rental property, you can go through the same steps that you did for your first. Should you run into any problems, think about how you handled similar situations previously.
Now You Know How to Buy Rental Property
As you can see, learning how to buy rental property isn’t hard. The hardest part of the process is getting money together to buy your first rental property, though you can get a mortgage without any problems.
Now that you have this info, we encourage you to start researching local properties as soon as possible. If you’d like to buy a property in another area, ensure you consider the mentioned factors before buying.
To learn more about real estate, take a look at our other articles.
About the Author/s
The New Jersey Digest is a new jersey magazine that has chronicled daily life in the Garden State for over 10 years.
