By Stacey Curiel
If you’re looking for a passive income stream, you might consider an investment property. You can rent it out to long-term tenants or short-term vacation-goers. This can be a great way to collect regular revenue without too much effort. That said, when you’re first getting an investment property off the ground, a lot of work is required. Here, Buy Sell Invest USA provides some insights into acquiring and managing a successful investment property.
Pick the Right Location for Your Investment Property
Location is a key factor when investing in property. If you’re planning to rent to vacation-goers, for example, you want to get the property in a place that has tourist attractions. If you want to rent long-term to families, other factors like school districts matter. Stessa has a roundup of the best U.S. cities for rental property investments, from Ocala, Florida, to Las Vegas, Nevada.
Understand What Makes for a Profitable Investment Property
Location is just one factor that makes an investment property a good bet. Other considerations include growth potential, the property’s condition and monetary value, and current market trends. If you’re having trouble finding the perfect investment property, a realtor can help. A real estate agent will know what neighborhoods are up-and-coming and will be able to negotiate a good deal for you.
If you want to learn from the professionals, check out Real Estate Pros Radio featuring Dawn M. Adams from Buy Sell Invest USA. She and Chad and Larry Jordan address all sorts of topics relating to being successful in real estate investing.
Figure Out Your Financials for Buying Property
When buying a property, odds are you’ll need a mortgage. Getting pre-approved for a home loan can help make you look like a serious buyer and improve your odds of quickly getting the house you want. When applying for a mortgage, get a head start by gathering the documents you need. Experian has a roundup of paperwork to collect, including recent pay stubs, W-2 forms, bank statements, and investment account statements.
Address the Administrative Side of Your Property Business
Treat your investment property like a business. First, educate yourself about the tax obligations that come with renting out property. Next, set up a limited liability company, LLC, to manage your rental income. An LLC helps to protect your liability, safeguarding you and your assets against potential litigation. You can avoid costly lawyer fees and use a formation service to set up an LLC.
Spruce Up Your Property to Make it More Marketable
The property you buy probably won’t be immediately rental-ready after you buy it. For example, it may require some basic repairs before you can market it to potential tenants. Beyond essential fixes, there are also additional steps you can take to spruce up the property and make it more appealing. Examples include adding a fresh coat of paint and updating the lighting.
Start Marketing Your Property to Get Your First Tenants
Once your property is rental-ready, it’s time to find your first tenants. Marketing is essential. RentPrep provides a guide to marketing rental properties, like partnering with local realtors. Also, make sure you’re appealing to your target audience. For example, if you’re trying to attract long-term renters like families, you probably want to highlight assets like a big backyard for kids to play in and a great school district.
Develop a Plan for Managing Daily Operations
An investment property doesn’t run itself. You’ll need to take care of basic maintenance, for example, and find tenants. If you opt for short-term vacation rentals, you also have to handle turnover between guests, which could include cleaning and repairs. If you don’t want to manage all these details yourself, enlist the services of a property management company to help stay on top of things.
You should also protect your investment by getting a home warranty quote. You may think that the homeowner’s insurance you have is enough, but it won’t cover repairs on or replacement of larger appliances and systems, like your HVAC unit or plumbing. A warranty can protect you from large, unexpected expenses, especially if you own an older property. Look for a policy that covers the specific items that are most likely to go out in your building.
Do Your Research and then Get Started
An investment property can be a great way to earn extra money, but it requires effort to set up. Taking care of essentials, like establishing an LLC and investing in a home warranty, can help you avoid stress down the line. But be mindful of the overall financial investment, and make sure that you are adequately prepared to invest. Once you have everything laid out, then enjoy the excitement of managing your first property!
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