The real estate market has proven itself to be incredibly resilient over the last year or two, and it demonstrates over and over again why investing in rental property is such a good idea. Smart investors know that when you buy and hold real estate, you have remarkable opportunities to earn consistent cash flow and build a steady and impressive strategy for long-term ROI.
But, you have to do it right.
New investors buying their first rental property or growing a portfolio need to keep these three things in mind, especially.
1. Outline Your Investment Goals
Hopefully you’ve spent some time exploring how, when, and why to become a real estate investor. If you’re ready to begin buying properties, you need to have an established set of real estate goals. Understanding what you’re hoping to accomplish, what your timeline is, and even how you plan to exit from various investments will help you buy the right rental homes.
If you’re interested in short-term vacation rentals, you’re going to invest in a very different property than an investor who wants to focus on long-term single-family homes in HOA neighborhoods that will appreciate in value over 15 or 20 years.
Decide what you’re hoping to achieve and prioritize your goals when you have more than one. This well-mapped plan will set you up for success and keep you from making impulsive decisions that don’t serve your needs.
2. You Need to Know Your Market
Research both the sales market and the rental market in the area that you’ve targeted for potential investment properties. National trends and figures will not help you. Rental properties are hyper-local. The rental value of one home can be quite different than that of another home – even in the same city. If you understand the nuances and trends of the neighborhood in which you want to buy a property, you’ll have a better chance at succeeding with your investment. Local market knowledge helps with pricing your property, marketing the home to potential tenants, and making the upgrades and improvements that good tenants demand when they’re looking for a home.
You need to know who your likely tenants will be. Are they families looking for good schools? Dog owners who need a fenced backyard? Perhaps you’re eyeing a neighborhood with professionals who want an easy commute to work or retirees who will want access to recreational and entertainment activities. Find out if the area is walkable or if a car is necessary. All of this information will help you buy the right investment and prepare for how you’re going to rent it out.
3. Professional Property Management is an Asset
Don’t wait until after you buy your investment property to consult with professional Grand Rapids property managers.
Leasing, managing, and maintaining a rental home is time-consuming. It requires a lot of knowledge and experience. Going it alone leads to easy and expensive mistakes.
A property management company will protect your investment, ensure you’re compliant with all state, federal, and local laws, and save you money on vacancy, turnover, and maintenance costs. You won’t have to worry about responding to tenants in the middle of the night or trying to decide how to manage a security deposit.
If you identify a good management company before you buy, you can access the resources and knowledge they have about rental rates, vacancy time, and competition.
We’d be happy to help. Please contact us at Short South Realty Group.