Owning your first Norfolk single-family rental property can be a fantastic experience. Yet, compared with all investments, there are some risks involved. There are various things you should know before purchasing to ensure that your first investment property purchase in Norfolk becomes as successful as you hope it will be. For example, you’ll need the answers to questions like whom do you want to rent to? What type of rental property will you look for? How will you finance your purchase? In what follows, we’ll discuss these issues as well as other important facts you’ll need to know to make buying your first rental property a rewarding experience.
Define Your End Goal
One of the most crucial things to take into account when making your first single-family rental home purchase is to set clearly defined end goals. Before starting your property search, you should dedicate yourself to determining what qualities you want in your investment property. Let’s say you might be searching for properties in a particular area with a specific number of bedrooms or minimum square footage. You can also concentrate on a particular renter demographic, like college students or retirees. Understanding the details helps you refine your search criteria and locate potential properties more quickly.
Prepare Your Finances
In addition to determining what qualities you prefer in a property, it is best to prepare financially before getting an investment property. Industry experts recommend paying down personal debt and saving for a down payment before starting your property search. Reduced personal debt can help you to qualify for more acceptable loan rates, while nearly all mortgage loans for an investment property will require a 20% down payment. Arranging to finance in advance is another key step, but be cautious about high-interest loans or mortgage products that seem too good to be true. By prequalifying with a reputable mortgage lender, you will be in a position to seize investment opportunities when they occur. You can more confidently acquire that rental property when the time comes by prioritizing financial readiness.
Crunch the Numbers
After taking these fundamental preliminary steps, the search for the right property starts. One critical factor to consider during your search is that you must run a series of numbers on every potential property, containing margins, operating expenses, and expected return. This is where many new investors make significant mistakes.
New investors should remember to include all the expenses related to purchasing and preparing the rental property for lease, as well as ongoing property management, maintenance, and vacancy costs. Industry experts suggest a margin of 10% and a 6% return in your first year means you have a profitable investment.
You have to remember that an investment property is just that, an investment. Getting attached to a specific property or permitting your emotions to influence your actions is not advisable. Plus, the property you buy is not necessarily one you would ever live in yourself. Industry experts suggest buying low-cost properties in high-demand areas for your first investment. Yet, stay away from fixer-uppers unless you are a highly skilled home remodeling expert or know a trusted contractor who will complete the work at a lower going rate. Your first single-family rental property must be seen as the first step toward a long and profitable investment career rather than the end goal. In this fashion, you can keep yourself on track and your investment properties in the black.
Design a Management Strategy
As a last note, buying a rental property is just the first step. A proactive management strategy is needed to guarantee the profitability of your investment. Working with a Norfolk property management company can be advantageous in this situation. As local market experts, property managers can help you locate off-market investment properties, analyze market conditions, set rental rates, and much more. As more savvy investors will certify, the right property management company is a vital partner in lucrative rental property investing.
Originally Published on March 13, 2020
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