Investment in Rental Properties
When it comes to real estate investment, or investment in rental properties, you want to make sure that your investment is profitable. However, this comes with experience and strong industry knowledge. If you’re not an experienced investor and this is your first time investing in rental properties, you’re most likely to be overwhelmed, over calculating, and hesitant. However, to make the leap, you need to be fearless.
Therefore, to help you feel in control and make an informed investment decision, here are some important tips for investment in rental properties. Let’s get started:
First Time Investment in Rental Properties Tips
Do Your Homework / Research
First things first, develop a solid understanding of the real estate industry. Luckily, thanks to the online medium, there are plenty of resources like courses, blogs, and online forums that you can access and get valuable insights while gaining crucial knowledge.
Start by familiarizing yourself with the market trends, historical market movements, consumer behavior, inventory available, terminologies, and jargon to communicate comfortably with your network and make informed choices.
Get to Know the Market
Indeed, due diligence should be your top priority. This should be done before you initiate a deal. Therefore, get to know the area, local market, including school districts, amenities, crime rates, property taxes, local home buyers, competition, and any other thing that you think can make an impact on your investment decision.
Ideally, you should consider investing in a place with a growing population, a revitalization plan, or a place where there are plenty of amenities, low property taxes, and a decent school district. Such investments are profitable because they sell fast and at high prices.
As a first time real estate investor, you may be tempted to get out there and make a big investment. However, that’s not recommended. If it’s your first time, then start small. Gain some experience before you go all out. Starting small can offer you many benefits such as:
- It will give you a chance to develop your understanding of how an investment actually works.
- It will help you see if you made the right choice.
- You can quickly sell it if you think you made a wrong decision and recover your money.
- You don’t have to worry about putting all your money in one place
Understand Your Criteria
Sit down and think about your investment criteria. Identify how much you are willing to invest. Be clear about your cap rate, net yield, cash flow, and cash-on-cash returns. This clarity will help you navigate your options confidently and invest in properties that meet your standards.
Use the Concept of Leverage to Increase ROI and IRR
Leverage is a proven investment strategy that first-time investors must understand and learn to use to their advantage. This investment strategy uses borrowed capital to increase their returns on investment and internal rate of return. Leverage in a real estate purchase can help improve your property’s net worth. It allows the investor to either buy the property that costs more than the available money or spread out the cash across multiple properties.
All this can get overwhelming for first timers. Therefore, it is advisable to work with an expert to make educated choices and invest your hard-earned money in the right place at the right time and grow your profits.