Boston Condos for Sale and Apartment Rentals

5 Things to do Before Investing in Rental Property

Having a rental property can be a great way to make money easily. However, when you look into investing in a rental property, there are many things that you will want to consider ensuring that you do not have problems with the rental property in the future.

1. Getting Your Finances In Order

Before you go looking for a rental property, you will want to make sure that you have your finances in order. You should have your active debt down to a manageable level, and you should ensure that you will have the money to be able to purchase a rental property. To find out if you really have the finances, you will want to get pre-approved by the lender. This will help you to see what you can realistically purchase and allow you to not waste your time.

2. Do Not Let Emotions Rule Your Purchase

Do not let your emotions rule your purchase. Keep in mind that you are not looking for your dream home, but instead an investment property. Do not get disgusted when you see a home that needs some work. Oftentimes, purchasing a home that needs some work is a great thing. While you will have to make repairs, once you have made those repairs, the house will be worth more, and you should be able to rent it for a decent amount of money.

3. Have Your Money Ready

One common mistake people make is not having a good down payment. With investment properties, lenders will not allow you to make smaller down payments like they would if you were living in the home. You will need to have at least a twenty percent down payment. It is important to note that mortgage insurance will not be available for your rental property.

In addition to your down payment, you will want to have your closing costs as well. You can expect that this will be two to five percent of the purchase price. You can negotiate the closing costs, and some sellers will cover the closing costs.

You will also need to have money for inspections. While you might be tempted to forego the inspections, it is a good idea, with this being an investment property, to do inspections. You do not want to get a nasty surprise later on if something like the septic tank fails. If you find issues with the rental property, you can get the seller to cover them. Or you may find that you have to walk away from the property due to the condition.

4. Budget

You should set a budget and stay within that budget when it comes to looking at homes. While it is tempting to look at homes that may be at the upper end of your budget, if you do closing costs and all that, you are going to go over your budget, and that could make your payments each month very uncomfortable. You do not want to get into a situation where you cannot rent the home out for as much money as you need for the mortgage payment each month. Learning how much you can realistically spend is one of the most important rules when it comes to real estate investing for beginners.

5. Location

When it comes to rental property investment, location is one of the most important things to consider. You do not want to purchase a home in an area of town that has high crime, as you will not get to rent the property out for as much as you thought you could. You also may deal with things like property damage. You will want to make sure that you invest in a home that is in a great location, close to shopping, schools, and more. You will also want to ensure that the house you purchase has access to the internet and all the necessary utilities. The more amenities that are closer to the house, the more you will be able to rent the home out for. If you do not know the area, you will want to speak with your realtor, who should be able to tell you more about the immediate area.

Investing in a rental property can help give you income and something to do. If you are interested in investing in a rental property, take the time to figure out how much you can spend and what you are looking for in a rental.