If you’re interested in starting a business that provides both freedom and passive income, renting residential properties might be just what you’re looking for.
Housing will always be in demand and not everyone can afford to buy their own home. This creates an ideal situation for someone who has some money to invest and is willing to learn how it’s done. Here are some simple steps for getting a solid start with rental properties.
Assess Your Financial Situation
There’s little sense in getting started if your finances are in disarray. This venture will almost certainly improve your financial situation, but you’ll probably need conventional financing for most of your deals. This means you’ll need good credit and some cash for down payments.
Conventional financing can require up to 20 percent down, plus closing costs. Check your credit files for errors and make sure you’re not heavily in debt. Even if you can qualify for a mortgage, your interest rates and terms will be better with good credit.
Find A Bank Or Mortgage Broker
If you have a good bank or mortgage broker already, it’s time to get to know them a little better. If not, ask another real estate investor in your area who they would recommend. Don’t be surprised if the smaller local banks treat you better than the bigger ones. Ask to meet the branch manager and mention that you’re looking to invest in some properties.
Tell him you would like to know more about their interest rates and services. Remember that they’re there to serve you and they should be happy to meet customers that look forward to doing business with them.
Find A Good Real Estate Agent
Although it is possible to find some good deals on your own, nothing beats working with someone who has access to all the current listings. However, not just any agent will do.
One who has rental properties of their own not only understands exactly what you’re looking for, but probably works with other investors all the time and can help you find reliable contractors, lenders and surveyors. For more information on surveyors, visit hdg.co.uk.
Research Different Areas
Get acquainted with different parts of town. Good deals can pop up anywhere, but if there’s lots of crime in an area, high vacancy rates might become a problem. Furthermore, you might attract tenants who are criminals, themselves. A high number of foreclosures or vacancies can indicate an area that’s in decline.
This is something to think about when you encounter unusually low asking prices. Look for working-class neighbourhoods with nearby schools and signs of future development.
Assemble a Team of Contractors
Keep in mind that you might find a really good deal on a property in need of repair. A distressed property might be too much for the current owner to handle, which could translate to a better deal for an investor willing to take it off their hands. Ask other investors or a real estate agent who they would recommend.
Budget For A Property Manager
Although there’s nothing wrong with taking care of your own property management needs, you might soon get tired of all the phone calls and maintenance emergencies. The more properties you own, the more this is going to occur. This is why it’s a good idea to include a property manager in the budget, even if you decide not to go that route.
Remember that things can change over time and what’s convenient now may become difficult later. If the numbers don’t work with a property manager in the budget, don’t buy the property. It’s better to be safe than sorry.
The easiest rental properties for a newbie to get into are single-family houses. Although their profit potential isn’t nearly as good as that of a large apartment building, you’ll only have one tenant to deal with and you’ll get a good idea of what it means to be a landlord.
Furthermore, single-family houses cost significantly less, are easier to finance and don’t require nearly as much work to maintain. You’ll probably also get a lower interest rate if you move in as an occupant and live in it for a couple years, before renting it out.
Hand Out Business Cards
Consider this the beginning of your marketing campaign. Let everyone know what you do for a living by handing out your business cards. Remember than anyone could be a potential tenant someday, even if they’re not currently looking for a place to live.
Renting residential properties can be a rewarding way to earn passive income, while building equity. It might seem complicated at first, but it gets easier once you’ve bought your first property and filled it with tenants. Before you know it, you’ll be looking for another one and wondering why you didn’t get started long ago.