Building Your Empire: Buying and Managing Rental Property for Beginners
Making your money work for you is all about accepting some level of risk. A savings account is safe, but you’re never going to grow your savings much beyond what you set aside. It’s not an investment. Rental real estate is an investment that grows with you; as inflation rises, so does the rent you charge. You can sell properties to fund your retirement or keep them for a steady stream of passive income. Buying rental properties, though, has to be handled with forethought, which is why you should use this advice from Blue Owl Properties before diving in.
Evaluate Your Position
Before you buy your first rental, take a hard look at yourself and your finances. If you don’t know a hammer from a screwdriver, or you don’t want to receive emergency calls at 3 a.m., consider hiring a professional management company. If that doesn’t fit your budget, start assembling a team of workers you trust.
Your budget is probably the most important thing to consider. You need to have extra cash on hand to make property ownership work. If you are paying down debt or expect to have increased debts in the next year or two, now is not the time to buy.
Find the Right Property
When you’ve got your ducks in a row, it’s time to find your first property. Start with a multifamily property of two to four units. When you live in one unit and rent the rest, you’re not only paying your own mortgage with passive income from your renters, but you also might be able to get a better interest rate listing the property as your primary residence. You can even use 75% of your projected rental income on your mortgage application.
A multifamily unit spreads your risk. If your rental house is empty, you have no income from that property until you can lease it again. With a multifamily unit, any one vacancy is only a partial loss of income. It’s one reason banks like multifamily mortgage loans.
Generating income quickly should be the primary goal of your first purchase; otherwise, you won’t be able to expand your real estate investments. To that end, avoid buying a fixer-upper as your first investment property. It takes longer to get it into market-ready condition, and you are likely to run into unexpected expenses that overrun your mortgage, creating out-of-pocket costs and stress. Save that work for after you’ve gained some experience.
Add Curb Appeal
While you want to avoid fixer-uppers, you still need to add improvements that increase curb appeal. Potential renters drive by and decide whether they even want to see the inside based on your exterior. Make sure there’s good exterior lighting to create a safe and welcoming entry at night. If the property has a yard, add some basic landscaping and fence the area to make it more appealing to families.
Before you hire fencing contractors, check online resources like Angi fence installation reviews. Narrow down a few candidates with high customer ratings, and meet with at least three to get a range of quotes and a feel for each business. Verify that each contractor is licensed and bonded in your state. The average quarter-acre property line fence runs $4,500, but the height and material all affect cost. Curbio explains you can roll the projected cost of improvements into your mortgage loan.
Planning, evaluating, searching and improving are the keys to finding the right rental property to seed your real estate empire, as is working with an expert real estate team like the one at Blue Owl Properties. Using the above strategies can help you build a secure future income.
Author: Katie Conroy is the creator of Advice Mine. She enjoys writing about lifestyle topics and created the website to share advice she has learned through experience, education and research.