Top 9 Ways to Succeed With Your First Investment Property
Written by: Veronique Hart, Property Management Specialist - Published: Nov 22, 2022
Are you an investor interested in investing in real estate? Many first-time investors are not sure where to start when investing in real estate properties. Perhaps you are interested in investing in real estate but fear competition from real estate conglomerates. The reality is that most rental properties are owned by first-time investors or those looking to earn extra income. In fact, the Pew Research Center reports that approximately 7 out of 10 rental properties aren’t owned by large real estate corporations but individuals who own one or two properties.
Thousands of investors like you are branching out into real estate and making a return on their investment. However, there are also those who make poor choices and suffer serious losses as a result. It is important that, as a first-time investor, you are fully prepared before investing in any properties.
Top 9 Ways First-Time Investment Property Owners Succeed
How should you prepare yourself before making a first-time property investment? With the right guidelines, anyone can make an informed decision on viable properties. The following guide demonstrates the primary ways investment property owners succeed. Take these tips into account as you begin your search for your first investment property.
1. Carefully review your options
Choosing to begin investing in real estate is an exciting step. However, there’s no rush to begin investing before you are fully prepared. Taking your time before making a commitment can save you a lot of costs down the road. Before purchasing a property, make sure to visit the location yourself to ensure the property listing is accurate. Compare and contrast a few available properties, looking especially for properties that are ready for tenants to move in.
2. Do not invest in fixer-uppers
While the lower price point of fixer-uppers can seem appealing to first-time investors, the reality is that these properties will likely require expensive, lengthy repairs before they are ready for tenants to move in. In some cases, fixer-uppers can be excellent, strategic investments that eventually result in profits for the investor. However, this takes the time and resources first-time property investors generally do not have. Large-scale renovations can take weeks, months or even years, all while standing vacant and not generating income from monthly rent. For your first or second property investments, it is wise to look for other established properties.
3. Look for turnkey properties
If fixer-uppers aren’t a good idea for first-time investors, what kind of properties should you be looking for? “Turnkey” properties have become a hot commodity in real estate markets across the country. A “turnkey” property is one that is ready for tenant move-in — no lengthy repairs required. While these may require a larger initial investment than fixer-upper properties, the fact that you can immediately begin renting to tenants means that you will start generating a profit much sooner than with a property that takes months to renovate.
4. Hire a property manager
Many first-time property investors are unsure if they should hire a property manager; after all, they’re only starting with a single property. While it may be tempting to forgo hiring a property management firm to save on costs, there are many reasons why you need a property manager as a first-time property investor. While you will need to factor the costs of the management firm into your budget, their experience in property management and their on-the-ground support will help you to ensure the long-term success of your investment.
5. Assess your budget
Keeping to a strict budget is crucial for success in your investment venture. If you find an excellent property, it is important to make sure it is within your budget before taking the leap. Going too far outside the bounds of your budget can present major problems down the line and eventually damage your bottom line. Calculate your estimated monthly expenditures and rental income to estimate future profits and ensure you are making a return on your initial investment.
6. Conduct a market analysis
Have you done your market research? Conduct an analysis of the local real estate market by comparing and contrasting similar properties in your area. What is the average selling price in the local market? What amenities do local tenants look for in rental houses, duplexes and apartments? How long have other properties been on the market? A thorough analysis of the local rental market will help you to make informed decisions and plan ahead.
7. Hire an experienced real estate agent
Choosing the right property investment is much easier when you work with an experienced real estate agent. As a local expert, they are more likely to find great investment opportunities as soon as they are available on the market. A reputable agent will keep your best interests in mind as you negotiate the purchase of your property. They will keep in mind your budget and your needs when showing you potential properties. Do your research and find a real estate agent that you feel comfortable working with throughout the buying process.
8. Review local laws and regulations
The last thing a property investor wants is to be hindered by legal red tape. Failure to abide by property laws can mean expensive fees or court cases that will make a serious dent in your profit margins. Make sure to do thorough research on local laws (both city and state) to ensure your property meets all regulations. As stated above, the work a property manager does can help ensure your property meets all local laws and regulations.
9. Plan, plan, plan
Lastly, nothing is more important than planning thoroughly. A thorough planning process is a crucial tool for a first-time investor. Take all of the above tips into account before taking any action, and your first property investment is sure to be a success. Having a clear timeline can help you to avoid common property investment pitfalls and give you a clear idea of what to expect with the future of your investment.
Is It Time to Invest in a Rental Property?
Are you prepared for a successful first investment property? If you have done the necessary research, found experienced real estate agents and property managers and found an ideal property for your budget, you can invest with confidence. With the right investment property, you will be on your way to an excellent source of passive income or the beginning of a career in real estate investing.