Rental properties can function as consistent sources of passive income and generate robust profits for their respective owners. Of course, this isn’t to say that finding and maintaining profitable rental properties is a walk in the park, especially for inexperienced investors.
So, if you’re currently looking to purchase your first rental, it’s in your best interest to proceed with caution and discernment. In the interest of making this process less stressful, put the following pointers into practice.
Give Some Thought To Real Estate Crowdfunding
When you’re the sole investor in a property, you stand to make a fair amount of money. The more capital you put forward, the more you stand to make – and the more you stand to lose.
Since most real estate investments don’t come cheap, it’s understandable that newer investors would be hesitant to go all-in on a property – even one that seems like a surefire moneymaker.
If this describes your situation, take care to give some thought to real estate crowdfunding. As is the case with other crowdfunding endeavors, this practice involves multiple investors putting forth small-to-moderate amounts of capital and sharing in the profits generated from their investments.
In many cases, the properties real estate crowdfunders invest in are located by individuals who specialize in tracking down low-risk, high-return investment opportunities, thus providing an additional sense of safety.
Of course, this isn’t to say that the crowdfunding route is for everyone. While you’re taking a much lower risk with such investments, you’re also going to be making less than you would from successful solo endeavors.
Still, if you’re just getting your start in real estate, crowdfunding can be a great way to learn about the ins and out of property investment.
Consult With Seasoned Pros
People who are new to real estate investing can benefit from the knowledge and experience of seasoned pros. So, if you have any friends, family members or neighbors who have successfully dipped their toes into real estate, you’d be wise to seek out their guidance before proceeding to make any large investments.
You can also get invaluable info from highly-rated real estate investment companies. Among other things, the right company will help you locate solid investment opportunities and walk you through various financing options. For example, if you’re curious about investing in real estate with your 401K, ask these individuals about the pros and cons.
Don’t Make A Fixer-Upper Your First Investment Property
It’s easy to see why many first-time investors are drawn to fixer-uppers. They tend to be considerably less expensive than well-maintained properties, and a growing plethora of property flipping-based reality shows has prompted many people to believe that fixer-uppers are sound investments.
Depending on the location, a fixer-upper can prove to be a profitable venture, but if you have no experience with such investments, you’re liable to find yourself hopelessly frustrated and bled dry financially.
After you’ve accumulated experience making small-to-moderate repairs and renovations to other properties, fixer-uppers are likely to seem less daunting.
Always Have Investment Properties Inspected
You should never allow yourself to be talked into purchasing an investment property that hasn’t been meticulously inspected by certified professionals.
While some properties have very obvious issues, it’s not unusual for ones that are seemingly well-maintained to house problems that can only be spotted by experienced pros.
So, even if you’ve been on a detailed virtual tour or completed a rigorous walkthrough, all property sales should hinge on formal inspections.
No matter how vigorously a seller pushes back against an inspection, you should hold firm. Should the seller absolutely refuse to allow an inspection to take place, this should be taken as a sign to focus your attention on other investment opportunities.
While some rental properties can generate considerable profits, others are liable to fill investors with a tremendous sense of buyer’s remorse. And considering how much capital is involved with real estate investments, regret is the absolute last thing you’ll want to be feeling.
As is the case with every type of investment, there’s no such thing as a surefire success in the real estate game – and it’s important for first-time investors to understand this. Anyone looking for effective ways to take the stress out of owning their first rental property would do well to heed the advice outlined above.
