Purchasing your first investment property is an exciting time in your life. However, it requires a vast amount of research and consideration before you sign the dotted line. Consider these six tips for buying and managing your first real estate property, presented below.
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- Purchase Under Your Business Name
Keeping your investments under the ownership of your business name will grant you several benefits. Start by coming up with a simple name for your investment company and look into forming a limited liability company (LLC). An LLC offers liability protection, meaning your personal and business assets are safe from litigation. There are two ways to go about registering. First, you can hire an attorney to take care of the paperwork and register for you. Your other option is to use a formation service online that costs significantly less.
- Look for Profitable Features
Before you narrow down a property, make sure it has features that will allow you to profit. For example, location is the most important feature. Research shows that choosing the right location requires you to consider several factors, including the market the property is in and the businesses in the surrounding retail center. Could the property possibly appreciate? Are the necessary repairs relatively low maintenance? Does everything appear normal for a straightforward sale? Talk to a real estate agent and have an attorney look over the contract before you sign.
- Start With a Small Property
When it comes to property investment, you would likely benefit from starting small, especially if you have a limited budget. A smaller property allows you to gain an understanding of what it takes to buy, repair, renovate, and put a property on the market. If you start too big it can become overwhelming.
For example, you may have more work than you have the manpower, or if you struggle to find tenants, your property could sit on the market for an extended period, leaving you in the negative each month. For example, if you purchase a large residential building, you need to find tenants quickly to start collecting rent and seeing returns on your investment.
- Have Your Finances in Order
One of the most important concepts to understand when purchasing a rental property is that you need to have your finances in order and be prepared to stay within a budget. For example, a proper budget should include a plan for the unexpected. Property inspections often uncover issues, but if you’re prepared, it shouldn’t derail your plans. Additionally, you should ensure you have enough money to wait out the right tenant.
- Consider Hiring a Property Manager
Managing an investment property can be a full-time job. If you want to spend more time focusing on your next investment and making plans for your business. Property managers will take care of the maintenance issues and manage the move-in and move-out processes for tenants, which can come with an array of issues.
- Minimize Liability
As a landlord, you are responsible for ensuring that your rental property is safe and habitable for your tenants. This means taking care of routine maintenance and repairs in a timely manner, as well as addressing any potential hazards on the property. For example, it’s a good idea to remove dead or dangerous tree limbs that could pose a safety hazard or potentially damage the property. There are probably tree trimmers in your area who can help with this service. Look for vetted professionals capable of completing this work.
Now that you have some insight into what you need to think about before investing in real estate, you can begin your search. Remember to start small for your first investment. The key is to treat it like a marathon, not a sprint.
