Although investing in real estate can earn you some serious profits, purchasing an investment property does come with its share of risks. This is not an easy way to get rich quick. Success is never guaranteed, and it will take a lot of time and hard work before you earn any money from your rental. Fortunately, there are steps you can take to ensure your property investment will turn a profit. Here are some things to consider as you navigate the home-buying process and get your rental ready to welcome tenants.
Consider Buying a Foreclosed Home
It's no surprise that foreclosures are tempting to first-time investors. Buying a foreclosed home can be a great way to acquire a property for a low purchase price, and may give you a chance to get into a neighborhood that would have otherwise been out of your budget. However, Redfin stresses the importance of understanding exactly what you're getting into before purchasing a foreclosed home, since the buying process is much different than a typical home sale. With the right research and preparations, buying a foreclosure can be a great opportunity to save some money!
Get Preapproved for a Loan
Whether you're buying a foreclosure or a regularly listed property, it's always a good idea to get a pre-approved mortgage. Getting pre-approved will let you know exactly how much money you can spend on a home, so you won't waste time looking at properties out of your budget. A pre-approval also sends the message to sellers that you're serious about buying, letting them know that the bank is ready and willing to lend you money for your purchase.
Screen Your Tenants Thoroughly
Many new landlords don't realize just how expensive bad tenants can be. Missed rent payments and property damage can put a significant dent in your profits, so take the time to screen your tenants properly before signing the lease. Conduct a short interview with your potential tenants and contact their personal references, employers, and past landlords to learn about their rental history and verify their income. If they pass these initial screening steps, RentPrep suggests running a background check to see if there are any red flags you should be aware of before handing over the keys.
Schedule Routine Maintenance
Maintaining your property is important for retaining your tenants and maximizing the return on your investment. According to Rentec Direct, there are a variety of maintenance tasks to take care of during every season of the year. In the spring, for example, you will need to clean the gutters, do some landscaping, and have the HVAC system inspected. Before winter hits, it's important to inspect the roof, wrap uninsulated pipes, flush the water heater, and prune any trees that could be hazardous during storms.
Hire a Property Manager
If all this sounds like a lot to take on, consider hiring a property manager. A property manager will handle all your landlord responsibilities, from marketing your rental and screening tenants to coordinating routine maintenance and responding to tenant emergencies at all hours of the day. Your property manager will also ensure that you're following all federal and state landlord-tenant laws.
Keep Your Emotions Out of the Picture
If you're new to real estate investing, it's easy for emotions to cloud your judgment. After all, buying your first investment property is very exciting! But emotional investing can cause you to rush the house-hunting process, cut corners on your research, purchase a property you can't afford, or rent to tenants who do not meet your screening requirements. To avoid these missteps, make sure all your decisions are based on logic. Set firm boundaries before looking at properties, do your research, calculate cash flow, and ask for advice from real estate agents or other investors if you need guidance.
Purchasing a rental property is a big step on the path to earning passive income. Before you start the complex home-buying process, take the time to consider additional steps-like weighing the pros and cons of a foreclosure, getting preapproved for a loan, screening tenants, or hiring a property manager-to help you save money and avoid unnecessary risk. Doing your research and planning ahead will set you up for success!