Buying your first rental property can be exciting as well as stressful. There are many factors to consider, from hiring a real estate agent to applying for a loan pre-approval. This blog post provides a helpful overview for first-time rental property buyers.
1. Hire a Real Estate Agent or Attorney
A real estate agent or attorney is indispensable when buying your first rental property investment. It’s important to have a qualified professional in your corner. You will need an experienced professional working for you and representing your interests. A realty agent or lawyer knows how to negotiate prices or spot potential problems.
Also, make sure that the person you hire has expertise in the type of property you plan to buy. For example, if you are investing in an office building, you’ll want to hire an agent who specializes in commercial property rather than a standard home realty agent.
2. Get Loan Pre-Approval
An important step in buying your first rental property is obtaining a loan pre-approval. Pre-approval for an investment property loan demonstrates to the seller that you are serious about buying their property. It also helps you set a budget and understand what types of investment properties you can buy. Before you apply, take steps to improve your chances of pre-approval:
- Save for the down payment
- Have a credit score of at least 680
- Maintain a low debt to income ratio
- Have cash available for six months of expenses
- Be able to prove your job history or income
3. Research Rental Markets
With the help of your real estate agent or attorney, research different areas to look for strong rental markets. For example, population growth often creates a flooded rental housing market and increases demand for rentals. Other factors to consider in your research include
- Job growth that expands the housing and commercial property markets
- Local crime rate
- Average household income
- School district
- Average price of similar properties in the neighborhood
4. Get Relevant Inspections
Before you sign on the dotted line, have the property inspected. It may be tempting to waive inspections to save money, but you may end up regretting the waiver. An inspection discovers problems with the property that may give you leverage when negotiating. You may want certain issues to be repaired before you buy the property. Or you may be able to use the inspection results to negotiate a reduced price.
5. Hire a General Contractor to Get the Property in Shape
You may want to make some changes to your newly purchased rental property. It is best to avoid buying a “fixer-upper,” but you may want to add upgrades or other renovations to add value to the property. When buying your first rental property, your best bet is to hire a general contractor for a remodeling project.
A general contractor has the necessary experience and expertise to hire qualified subcontractors, obtain permits, find the best materials for the job and carry out other relevant tasks. Boston-area rental property owners can rely on the general contracting experts at RH Blanchard. Get in touch for a free quote.