Four Tips for First Time Real Estate Investors

  • 4 years ago

Four Tips for First Time Real Estate Investors

When considering the possibility of investing in real estate, it is important for you to consider the following information before committing to real estate investment. Here are our top 4 tips for first-time real estate investors!

1. Are You Comfortable Being a Landlord?

Would you consider yourself a handyperson? Part of owning investment property is having a mechanism in place for dealing with maintenance requests from your tenants. It is not required for you to actually be a handyperson and do all the maintenance yourself, but you need to have a system in place such as a team of handypeople, professional property management, or contractors that can execute on those maintenance requests for your properties. Make sure to account for the cost of hiring and retaining those individuals in your investment analysis.

2. Property Location Matters

When looking at potential locations for your first property, you must think as your potential tenant would. Is the property you are thinking about good for singles, couples, small families, or large families? If so, what are the things that are important to them? Are school rankings at the top of the list, and is the property you are considering in a strong school district? Maybe proximity to high paying jobs is more important? Always make sure to look at local community amenities, crime rates, and the overall city outlook. These are just some of the location factors you should be considering in your first investment property. Failing to consider the priorities of your potential tenants could cost you dearly when you set the rental rates for your units.

3. Always Compare Buying Vs. Financing

What can you do to maximize your ROI on your investment property? When deciding to buy the property outright or financing with 20% down, you have to consider what your goals are. If your objective is to generate cashflow every month, buying the investment property outright instead of using leverage to purchase the property might make the most sense as you will not have a monthly mortgage payment. However, if your objective is to maximize your ROI on the investment, then financing might be the better option. Remember that when using leverage to purchase real estate, you also leave yourself with funds to put the down payment on a second and third property and diversify your portfolio.

4. Protect Your Investment

Everyone knows about homeowners insurance, but have you heard of landlord insurance? Protect your revenue-generating property by protecting it with landlord insurance which will help protect against property damage, loss of rental income, and much more related to renting out your property!

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