Real estate investing is a great way to increase your financial portfolio and put yourself in a better position, financially speaking. Before you dive in and choose a rental property, however, you want to make sure it will be profitable! Consider these key dos and don'ts, whether you're ready to jump in with your first rental property or you're considering adding to your rental properties in the Northern Virginia area.
Do: Know your limitations.
Fixer-uppers are often popular choices for real estate investing. They're priced lower, which means that you'll take out a smaller loan to begin with. In many cases, fixing things up can allow you to substantially increase the value of a home.
At the same time, it's important to know your limitations. Just how much renovation work can you handle? Are you prepared to jump in and take care of a large portion of the repairs to the property yourself? Do you have a team in place to handle any of the details you can't take care of on your own? Make sure you're prepared for whatever the property needs--and that you won't find yourself pouring money into a money pit.
Do: Think through your entire budget.
It's not just about what you can afford when you're ready to fix up the house. You'll also need to consider your entire budget. Can you handle paying the mortgage on the house if it takes a little while to move in a renter? Are you prepared to pay property taxes? What about the cost for a rental property manager? By carefully thinking through your budget before you purchase a new rental property, you'll set yourself and your property up for financial success.
Do: Get to know the area (and the people).
You may already have an idea in your head of an ideal renter. Maybe you like the idea of providing budget-friendly housing for college students, or perhaps you would prefer to rent to a young family. Before you purchase a rental property, get to know the area. Learn more about the people there. Do they fit your target demographic? Can your target demographic afford to rent the type of house you're offering? In Fairfax County, for example, the median home price is over $500,000, so you may need to target families that are fairly well-established to fit your rental budget.
Don't: Overlook potential issues with the property.
When you purchase a home for yourself, you can decide that the good things about it outweigh the bad. When you purchase a rental property, on the other hand, you want to make sure you consider all the potential pitfalls before you jump in and buy the property. Take the time to think through how you will handle any problems as well as how those problems might impact your purchase.
Don't: Try to do it alone.
In order to invest in rental property, whether you're using it as a retirement strategy or simply trying to build your financial portfolio, requires a team of people behind you. You may want to work with an accountant to help you figure out the financial ins and outs, especially when tax time rolls around. You will need a realtor who understands the rental market as well as your specific needs. If you don't have the energy, knowledge, or desire to manage your rental properties on your own, a rental property management firm is one of the most effective ways to ensure that your rental property is fully taken care of. As you build that team, you'll find that you're far better prepared for the challenges of taking on a rental property.
Are you ready to invest in a rental property? Do you already have a rental property, but need someone to manage it for you? Contact us today to learn more about the wide range of property management options we offer.
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