Turning a Profit on Your First Investment Home
Every real estate investor dreams of becoming the next land mogul. However, we all have to start somewhere, and that usually means starting small. It takes time to build an empire. Thankfully, with a little preparation now, you can lay a solid foundation upon which to build your financial future, whether you’re investing in a vacation rental or traditional rental.
Setting your expectations
First things first: You cannot expect to become an instant millionaire off a single property. Instead, look at your first investment as your learning curve. It’s an opportunity to experience first-hand the ins and outs of the business. Ideally, you’ll make some money, but it will take multiple rentals to replace an income.
A real partner
Once you understand the limitations of an investment property, look for a realtor that can help you identify properties that are below local market value, which gives you a better chance at doing more than breaking even each month. Your agent will have many valuable tools at their disposal including the MLS and marketing materials to help you spread the word that you are looking for a place to purchase. A dedicated agent will keep their ears open and maintain a network of other agents. Doing so can help them identify single- and multi-family homes that may be heading for the market but have not yet been posted online.
Next, consider how you will manage your investment. It is almost always a good idea to partner with a property management company. This will eliminate many sources of stress, including home maintenance requests. A good agency will also offer all-inclusive fees, as well as give you tools that allow you to easily communicate with your property manager and access your rental portfolio at any time. If you’re renting your home to tourists, you’ll want a property manager that specializes in vacation rentals. Property managers such as Turnkey can offer your guests easy online booking, keyless entry, and 24/7 support, which in turn can lead to positive reviews, making your home even more desirable to renters.
A property management company can also handle tenant screening, which is crucial when filling vacancies. UpCounsel explains that there are many red flags to look for including prior evictions, payment history, and financial stability. Trying to dig through tenant information on your own can leave you confused, frustrated, and with the wrong people caring for your house, apartment, or condo.
Let’s all agree
One aspect of becoming a landlord that can never be overlooked is learning how to write and execute a lease agreement. You can find sample contracts online, but it is always wise to have an experienced real estate attorney review these documents. A lease agreement is one way to protect yourself in case your tenants turn out to be a problem for you or the neighborhood. Within this document, you can outline your expectations of their behavior in your home and also what you, in turn, will provide.
On site
In addition to having the right people in your corner and drafting equitable legal documents, once you choose a property that you like, you’ll also benefit from having a property inspector pay it a visit before you make an offer. A home inspection includes information about the home’s major systems, its structural integrity, the roof, and other important features. Keep in mind, however, that it does not tell you whether the property is up to date with current codes. You might be required to ensure the building is safely habitable and up to code standards – contact your local codes department if you have questions.
While you and your inspector are visiting the site, drive around the neighborhood. This can give you a great idea of how people nearby upkeep their properties, which makes a big difference when you are showing the home to potential renters.
There is an almost incalculable number of pieces that go into the puzzle that is being a landlord. The above information recounts just a few of these. But, once these things are locked in, the rest will come together, and you will soon start seeing an increase in your income.
Want information for other areas? Comments? Questions? Send me a message, I’d love to hear from you!
Covering Silicon Valley. All information from the Multiple Listing Service.
