There are nine steps you need to take to purchase your first rental property:
1. Identify the market in which you want to invest. It makes a lot of sense to invest in your own backyard, but there are plenty of markets out there that make sense. However, if you’re just starting out, closer is better so you can have eyes on the property.
2. Choose a real estate agent. There are rental investments you can do without an agent, but hiring an agent is going to help if you’re just getting started as an investor.
3. Get pre-approved. You don’t have to use all your cash to buy a rental. If you structure your deal in certain ways, you can buy with as little as 3% or even 0% down. Your typical investment loan requires 20% down.
4. Analyze the property. I think this is the most important step. You need to run comps, assess its condition, and crunch the numbers on what your payments will be versus what you could rent the property for. Spend a lot of time on this part of the process to become a good investor.
5. Start shopping for properties. A good agent will set up a search that automatically sends you homes that match your criteria as soon as they hit the market.
6. Analyze all potential properties. You might have dozens of homes to look at, but the more practice you do with analyzing, the better you’ll get.
7. Start making offers. You’re not going to win every home, and that’s completely fine. We probably make 10 offers for every property we win. Eventually, you’ll get one under contract.
8. Due diligence period. This happens after the home goes under contract. You’ll need to have the home inspected and appraised to see if it’s still going to be a good investment. Any repairs will be identified, rental comps will be analyzed, and agents can help you estimate the total cost.
9. Manage the property. You could do steps one through eight perfectly, but if you mess this step up, your investment will tank. You can either manage the property yourself or outsource that work, but it’s vital if you want to see financial success as an investor.
If you have questions about these steps or anything else related to real estate, don’t hesitate to give us a call or send an email. We look forward to hearing from you soon.