That being said, it isn’t easy money and you must prepare carefully before actually signing on the dotted line to buy your first investment property. Here is what you should do when setting up your operations.
Create A Business Plan
Although it may not seem like it at first glance, investing in real estate is essentially running your own business. You will need to treat it as such in order to be successful, and that includes drafting a business plan.
Your business plan should include key information such as the type of housing units you wish to purchase as well as your business model. For example, you have the option of flipping homes or functioning as the landlord of your owned properties.
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Like other businesses, some kind of niche or specialty makes it much easier to market your properties and stand out from your competition.
Your business plan should also outline your regular operations, operating expenses and plans for growth. You will likely need a business plan if you plan to ask for commercial loans.
Gather A Network Of Professionals
Most real estate agents work with clients who are buying or selling properties for their own use. These agents are not as useful to a first-time real estate investor and you should seek to find an agent who works specifically with investors. An agent who has real estate investing experience of their own would be best.
Find an agent you like so you can work with them to manage your portfolio over a long time. Aside from a real estate agent, there are other professionals you should bring into your network as you get started investing.
Attorneys dealing in real estate sales and landlord-tenant laws are essential to help you purchase properties and draft up leases that will protect you from serious legal liability down the road. Qualified contractors will also be necessary.
Finally, you may choose to bring in a property manager to provide professional management services and handle many of the day-to-day matters of your property for you.
Get Insured
According to KBD Insurance, a company that does landlord insurance in Montreal, owning a rental property is a great way to build wealth. With that said, you will also need to carry insurance on your new properties.
You will be required to have insurance if you purchase the property with a mortgage or if it is otherwise required by your state. Even if insurance is not required, failing to carry it could be catastrophic, as you will have no protection if the property is damaged or destroyed in a disaster or a tenant injures themselves due to an issue you could have prevented.
Look into local providers near where you are purchasing properties to find solutions that will meet your needs, the needs of your tenants and the law. Another thing you will have to consider is your policy on renter’s insurance.
Your insurance as a landlord very rarely covers the belongings of your tenants, and many landlords either require tenants to carry renter’s insurance or strongly recommend it. Determine what your policy will be.
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Base Decisions On Cost-Benefit Analysis
You should not base your property purchasing decisions on emotion or any other factor you would normally consider when buying a property in which to live yourself. It needs to instead be based on hard data such as expected value appreciation, how much you will be able to charge for rent, how much it will cost to fix and maintain the property, and more.
Every decision regarding this property must be a business decision, driven by hard numbers, so you can turn a profit and ultimately be successful. For example, when looking for a house to buy and flip, you will need to consider the asking price in comparison to other properties in the area as well as how much money and work will need to go into the property before you can resell it. That information then needs to be compared to the expected resale price.
Much needs to be considered before you buy your first investment property. If you plan correctly, you are far less likely to run into problems that could put your business into trouble. Learn from mentors, other real estate investors, and other professionals as you begin this journey.
Image Credit: real estate investment by Pixabay
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