MSN lists 5 tips to help you get started with an investment property that are right on the mark with my experience. Their bottom line is that they think low home prices combined with low interest rates make it a great time to buy a rental, and I have to agree!
- Know your options. There are different strategies depending on whether you want to be a landlord, or restore and resell properties. In my case, I chose to focus on rental properties.
- Partner with experience. Work with an agent who has the right experience, or partner with an experienced investor. I did both — worked with a friend who also started investing in this market, and found a real estate agent who also does the same. We regularly share ideas and advice, which sped up the learning curve greatly.
- Look for the right location. For rentals, they suggest to stick to high population areas, houses with multiple bedrooms and baths, and near amenities like shopping areas and public transportation. I chose to focus on single family houses in a working-class neighborhood, and found that 4-5 bedrooms seem to bring the most profit due to the type of renters that I am targeting.
- Have capital lined up. Perhaps easier said than done in this economy, but you should expect there will be months when the property isn’t rented or sold, and you’ll have to pay the mortgage. They suggest keeping six months of mortgage payments saved, in case you need it for an emergency. You don’t want to stretch yourself too thin, and become another victim of buying more than you can afford that caused the housing bubble to burst in the first place.
- Build a supporting cast. You need to have good, fast, and affordable contractors available for renovations and repairs. I’ve worked with my “partners” (my agent and my friend) to find good contractors, and used services like Yelp to get others when an emergency arose. They also recommend that you might need an attorney or accountant, but I haven’t needed them yet.
What do you think? Have any other good tips for new investors?