With such a large number of people looking to invest in real estate, it's no wonder that there are so many opportunities available. Some may be interested because they want a recurring income from renting out their property or an opportunity for appreciation, while others might feel diversifying into this market will give them more stability with investments than stocks and bonds can provide. Regardless of how you choose your path, success requires planning. In this article, we'll walk through six important steps every aspiring landlord should take before jumping into owning and renting out homes.
1. Know your financing options
You'll need to have a Plan B – and maybe even a Plan C – when it comes to financing your investment property. You may not be able to get a traditional mortgage from a bank, so it's important to know what other options are available to you, such as Groundfloor. There are a number of government-backed programs that offer to finance investment properties, and private lenders like Groundfloor may be willing to work with you as well. You should also have a clear understanding of your down payment options, your fees, and how much money you'll need to bring to the table.
2. Do your homework on the property
Before you buy an investment property, it's important to do your homework and make sure you're getting a good deal. That means researching the area where the property is located, as well as the condition of the home itself. You'll also want to be sure to get a realistic estimate of what it would cost to renovate or repair the property, if necessary. It's also a good idea to have a realistic expectation of what the rental income from the property could be.
3. Get familiar with the law
There are a number of laws and regulations that apply to investment properties, so it's important to get familiar with them before you buy. You'll need to know about things like zoning laws, building codes, and health and safety regulations. It's also a good idea to brush up on your knowledge of landlord-tenant law so you'll know your rights and responsibilities if you do decide to rent out your property.
4. Find a good property management company
If you're not planning on being a hands-on landlord, then it's important to find a good property management company to take care of your investment property for you. A good property management company will handle all the day-to-day responsibilities of being a landlord, from finding tenants and collecting rent to taking care of repairs and maintenance.
5. Have a Plan B (or C)
As with any investment, it's important to have a Plan B – or even a Plan C – when it comes to your investment property. That could mean having some cash saved up in case you need to make repairs or cover unexpected expenses. It could also mean having another source of income to fall back on if the rental income from your property isn't enough to cover the mortgage and other costs.
6. Be patient
Investing in real estate takes time, so it's important to be patient. Don't expect to make a fortune overnight – or even in the first year. It can take time to find the right property, get it repaired and up to code, and find tenants. But if you're patient and willing to put in the work, an investment property can be a great way to build wealth over time.
Now that you know the six steps to take before investing in real estate, it's time to start looking for and investing in your dream property!
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