Buying a property with the intention of renting it out while you live in your primary residence is a financially savvy move. You will bring in extra income while also building more long-term equity and wealth. Buying a rental property for the first time does come with some extra considerations, however. Here are a few tips for buying your first rental property:
Be Wary of Fixer Uppers
Unless you are experienced in home renovations, your first investment property may not be the time to buy a fixer upper. Spending more for a home that is essentially turnkey ready means way less stress and that you get to begin earning rental income much sooner. If you buy a home in need of serious repairs, you may be surprised by how quickly you go over budget and how long the renovations may take. A home that needs minor updating, like new paint and fixtures, but is essentially ready to rent out is a better bet.
Research the Local Market
Before buying a rental property, you need a very clear idea of how much you can expect to earn in rent. Look for neighborhoods with thriving rental markets. Your options include buying a home in an area with a lot of recent transplants looking for rental homes, renting to college students (which can involve risk to your property but ensures consistent rent), or choosing a home that appeals to tourists and renting it out as a short-term vacation rental.
Keep in mind that if you are interested in the vacation rental option, state, city, and local laws and regulations vary greatly from place to place, so it pays to do research ahead of time.
Consider Hiring a Property Management Company
To make your experience as a first time landlord as low-stress as possible, consider hiring a property management company. They will market your rental, screen tenants, handle cleaning and repairs, and essentially take most of the landlord chores off of your to-do list. Property management companies can help ensure you have lower vacancies and get the maximum rent, so you may make more money in the long-run. Most charge a small monthly percentage of your rental income, so they have a great incentive to keep your rental occupied.
Following these tips and working with a trustworthy and experienced real estate agent will help ensure your first rental property purchase is one you don't regret.