6 Tips for Buying Rental Properties
#1: Knowing your numbers
- Having detailed criteria that you follow is crucial when investing. If you don't know or understand where your money is coming or going, you will never succeed as an investor. 3 key factors to consider are; cash flow, cash on cash return, and appreciation rate. A simple rule I use that can quickly depict if a deal is prime or not is the 1% rule. If the rental rate is 1% or more of the purchase price then it is usually an adequate deal.
- Knowing the stats of locations you look to invest in is very important. The crime rate and occupancy rate of an area can be detrimental to your investment. The most ideal places to invest would be areas with low crime rates and high occupancy. Also, don't be scared to invest outside of your city. There are opportunities everywhere so don't limit yourself to just your area.
#3 Get A Mentor
- It’s always a good idea to get help when you're new at something. Having someone teach you that is an investor themselves is something I consider to be crucial when starting out. Experience & organization are two things I recommend to look for in a mentor.
#4 Get your money right
- I hear people say all the time "you can invest in real estate with no money at all". While that may be true in VERY special cases, for most deals you will need money. When financing an investment property you can expect to be putting down 20% of the purchase price . The actual price ranges up and down but is still a decent amount of money on most deals. I recommend saving up to around $25k-$45k before making the jump into the investment world.
#5 Find an Agent
- I believe it to be very important to have a knowledgeable Realtor when investing in real estate - especially when starting out. Quality agents show, sell and analyze real estate everyday. Having someone like this on your team can prevent you from buying the wrong investment property.
#6 Don't be short sighted
- Great investments come in all shapes and sizes. Sigle family, multifamily, condos, commercial, self storage, trailer parks and agricultural land can all be great investments. If the numbers make sense then don't be closed off to the idea of something different. If your unsure of investing into something new you can always ask someone who has bought that specific type of investment property to partner up with you on a deal.