3 Things Every First-Time Investment Property Buyer Needs to Do
Photo via Pexels
Written by Katie Conroy
Buying your first investment property can be really exciting, which is why it’s also easy to get carried away. You need to be able to take a step back and think strategically if you want this to be the first of a successful property portfolio. There are countless things to consider, but here are three areas that are particularly important for first-timers.
Determine a Target Audience
Who is your ideal tenant? A family on vacation, a couple on their honeymoon, a single senior renting long-term, or a group of young professionals? Thinking of this before buying will help you make decisions regarding location, size, features, and pricing.
It should go without saying that, as established in the Fair Housing Act, you are not allowed to discriminate on things like age and familial status when choosing tenants. What you can do, however, is know what kind of tenant you are aiming to attract when you select a property.
Perhaps the most important decision to make once you figure out your target market is the location. You can look for the best neighborhoods for, say, families or seniors. If you are planning on investing in a vacation rental, do some research on where tourists like to stay.
Keep Renovations to a Minimum
Don’t be tempted by a fixer-upper — it’s one thing to spend thousands of dollars on renovations when you’re building your dream home, but it’s another entirely to sink that money in an investment. In particular, steer clear of fixer-uppers with poor layouts, foundation issues, bad locations, or which are surrounded by abandoned homes.
Instead, look for something within your budget that only needs minor changes. Be smart about the renovations you make. A few low-cost renovations that make a big difference include sprucing up kitchen cabinets and bathroom vanities, a nice backsplash, and fresh paint.
It helps if you are handy enough to do most of these jobs yourself. Generally speaking, being handy is incredibly useful for being a landlord, as you are definitely going to make some repairs. As a minimum, you should know your way around DIY tasks like basic plumbing, HVAC maintenance, drywall patching and replacement, and appliance troubleshooting.
Invest in a Management Company
Becoming a landlord involves a lot of upfront costs, and it will take time before you are making any sort of reliable income from it. Therefore, unless they have a sizeable safety net, first-time landlords can rarely afford to quit their full-time jobs to focus on the work. The problem is that being a landlord is a 24/7 job in itself, and it can be quite an overwhelming one at that.
This is why it is recommended that you use a property management company. This is especially the case if you are buying a vacation home, as the constant turnover means quite a lot more work than a long-term rental. A vacation rental management company like Turnkey can offer 24/7 local support, professional cleanings, and easy-to-use booking systems.
For regular properties, management companies are ideal if you can afford to lose 5 to 10 percent of your rent earnings in exchange for considerable time savings. That said, if you’re in a down market and you have time to manage things yourself, you may be better off holding off.
The key to making your first investment property a success is to both spend a lot of time thinking about every decision carefully and to minimize the amount of time you actually need to spend working on and managing the property. Even with a little renovation and the help of a property management company, being a landlord is hard work, so try to keep things simple for yourself during your first try. You can always take riskier investments as your confidence and resources grow, safe in the knowledge that you know how to make smart decisions.