Top Tips For Buying Your First Rental Property

Investing in a rental property sounds like a dream come true. All you have to do is buy the place, fill it with tenants, and then see the income roll in, right? The answer to that question is both yes and no. Owning a rental property is definitely an excellent way to have a fairly passive income, but getting to that point of actually having the income, with a building full of tenants, is a lot of work. Thankfully, there’s a few basic things you can do that will get you to your first property and on your way to earning that income.

Find the right realtor

Step one, before you do anything else, is to find the right realtor. You certainly can try and find property for sale on your own, and attempt all the research, inspections, negotiations and closing, but be prepared for an incredible amount of work. It is certainly possible, but the process is infinitely easier when you have an experienced realtor to work with. Check out these tips for finding a realtor to get you started.

For one, your realtor will most likely have better negotiation skills than you. They’ve been doing this for a while, and know how to talk a price up, or down. They’ll also know what prices ought to be for that neighborhood, and have access to a wealth of information about the types of homes and buildings in the area. This gives them more power when negotiating than the typical buyer on their own.  

Realtors will know prime property for sale sooner than the general public, sometimes knowing when property is for sale well before it is posted. This can give you a leg up when searching in popular and fast selling neighborhoods compared with looking yourself.  

Consider a rental property manager

Another common misconception of owning your own rental property is how easy it would be to manage it. It’s tempting to assume that once you’ve got everything set up, all you need to do is collect rent cheques and fix the occasional leak or crack. But, you’ll need to ask yourself if you’re really ready to be a landlord and prepared for the work involved.  

If you’re a hands on type of person and love fixing things yourself, and if you have time to spare to visit the rental property often, this could be a perfect venture for you. However, for most of us, hiring a trustworthy rental property manager is the way to go.

Property managers can handle the entire rent collection process, tenant screening, maintenance and upkeep. They’ll also be able to do the dirty work of evicting tenants if needed, or charging late fees on late rent payments. This means that you can truly sit back and enjoy the profits of your property, while allowing you time to enjoy your life or continue working in your career.

When it comes time to fill your property with tenants, rental property managers shine the most. They specialise in this, which means that they most likely have a solid system for screening tenants and finding good fits for your space. They also are able to market your property much better than you could on your own, as they have not only the experience, but the market presence and reputation behind them. Rental property managers add a buffer between you as the owner and the tenants, which means they can more easily enforce the rules regarding rent and the unit. This means they will have more success with keeping rent cheques flowing in and the state of the flat in good shape.  

Consider your neighborhood

When you’re deciding on property, considering the neighborhood that you’re looking at is vital. For one, make sure you know what other rental properties in the area are charging for rent. This can help you gauge what kind of income you can expect, and if that matches up with what you’ll be paying on the building.

Also consider the type of tenants you’ll have in the building. Are you looking in a neighborhood near a university? Or are you looking in the suburbs in a primarily house driven neighborhood? These kinds of questions will help you find out if your tenants will be long or short term, and what you may expect in maintenance.

Upkeep and renovation

One final thing to consider before buying is how much work you’ll need to put into the property. Are you purchasing a fairly new building that is already outfitted for tenants? Or, will you need to fully renovate your building? The first will naturally be an expensive investment, but the latter the longer one and more hands on.

Regardless if you choose a new or old building, an incredibly important way to help you mitigate the risk of buying an existing building is to get a full building inspection. Make sure your inspection upon buying the building includes a full walkthrough of the entire building, as well as the outer walls and roof of the complex. This will give you a good idea of what to expect with repairs or renovation.

You’ll also want to think about how much your costs will be after each tenant. If you predict that your tenants will be short term and switching out every lease term, it’s possible you will need to replace appliances, lights, carpeting, etc. more often than if you had long term renters. You may also need to invest in carpet cleaning or professional cleaning to keep your units fresh between each tenant. Longer tenants can also rack up repair costs, so regardless of your length of renters, make sure you’ve set aside money in your annual budget for these costs.

With keeping these tips in mind prior to buying, you’ll have an excellent chance of succeeding in your rental property ventures. Remember that you don’t need to do everything yourself, and things like property managers and inspections can seriously save time and money in the long run, making your entire experience a great one!