When buying your first investment home, you will need to ask yourself several questions like: Are you able to manage the property yourself or will you need to hire a property manager? Do you have the necessary cash reserves?
Owning a home and renting it to tenants is not rocket science, but there are several things you will want to think about before making that first investment.
Location
Many of the same rules of location that you would apply to the purchase of a home you intend to live in apply to investment properties as well. You should consider whether anyone would want to live in the area, is it close to where people work, play, eat, and so on. A good way to get some help with this is to enlist the help of a good real estate agent who has experience in helping people choose and evaluate potential rental property. Remember that using an agent to help you buy a property will not typically cost you anything out of your pocket and will likely save you a great deal of money.
Condition of the Home
Many times people have the impression that they can make a bunch of money buying a home that needs substantial work and fix it up. While possible, it works best if you are handy and are able to do some repairs yourself. If you would have to hire a contractor or repair person to do all the work, it may be a better fit for you to purchase a home that does not need much work.
Consider Hiring a Property Manager
You may want to consider hiring a property manager if you do not live in the same area as your first investment home. Also, property managers will be familiar with all the tenant related laws in their area and will know what is permitted in working with tenants and what is not. Tenant law is serious business and it is strongly recommended that you do not take this area lightly. If you choose not to hire a property manager, you should spend some time getting acquainted with the law. You will also have to consider things like how you find tenants, are they qualified, how much rent to charge, and where to get a copy of a blank lease and any other documents you may need.
How Much Money Do You Need?
This is probably the first thing people considering their first investment in real estate think of, but they may not know all the different items that will consume your cash. Just to be safe, you should assume that you will need to put down 20 percent of the purchase price. There will also be closing costs, inspection fees, renovation and repair costs, and you will want to have an emergency fund set up in case you need to make sudden major repairs to the heating and cooling system.
Many investors have amassed a great amount of wealth by investing in real estate, and single family properties offer a good entry level introduction to the world of real estate investing.
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