Purchasing a rental property for the first time is an exciting investment when done properly. The income gained from rent and property appreciation can help you achieve your goals, whether that’s building a robust portfolio, saving up for post-secondary, or anything in between. That being said, real estate is a complex industry that can easily take you and your wallet for a ride if not approached judiciously. While there’s nothing like learning on the go, we’ve put together our top five tips you should know before you start searching for your first investment property.
1. Get in At the Right Time
As is true in all things financial: timing is everything. Real estate is a great example of this. Buyers of any experience will want to take advantage of low interest rates, reasonable prices, and great selection. In a typical year, the warmer the temperatures, the higher the cost of homes tend to be. This is because most people are searching in the spring so they can make a move in the summer. The past couple of years, however, are special in that interest rates are still sitting at record lows. If you have the means and your finances are in order, now is a great time to take the leap into real estate.
2. Read the Signs
There are some aspects of a neighbourhood that should stick out to you even more than curb appeal. After all, you can shine up an exterior, but these factors are nigh unchangeable:
- High Vacancy Rates. Getting the most out of your investment property means having it rented out as much as possible, with minimal breaks in between tenants. Check out how many homes in the area remain vacant for months at a time. Chances are, yours will fair somewhat similar, so keep that in mind when choosing a neighbourhood.
- Crime Levels. Higher crime rates tend to result in lower housing costs. This can be both a benefit and a detriment for landlords. The benefit is that the buy-in cost is much less expensive. The detriment is that buying in these areas results in a higher risk of break-ins and vandalism. Instead, opt for a place with a reasonably low crime rate that you can afford.
- Proximity to Schools. Another element to consider is how close you are to schools. Grade schools will attract families interested in long-term rentals. Post-secondary institutions like universities will bring in younger renters with a higher turnover rate. Consider which style of tenant you would like to work with in the long run.
3. Be Financially Conservative
If you’re looking to buy an investment property, chances are you’ve already purchased a home or two for yourself over the years. This experience probably showed you that buying is always more expensive than you plan for. Use your knowledge of real estate and prepare to spend more than you originally intended. This budget shouldn’t just cover the purchase price of the house, the lawyers, and the closing costs. Ensure that you also factor in renovations needed to get the place in renting condition.
4. Hire a Property Manager
First-time rental property owners will almost always benefit from working with a third-party property management company. They can help you with almost every aspect of running your investment, from tenant screening to collecting rent, advertising to overseeing maintenance. At GIL Property Management & Sales, for example, we offer tailored service packages to help cover only the areas that need our support. Whether it’s turnkey management or leasing only, you can select a plan that works for your unique situation.
5. Prioritize a Move-In Ready Property
Finally, we always suggest prioritizing a move-in ready property for your first one. Unless you have a background in construction, major repairs and renovations can cost more time, stress, and money than they will save in the long run. Small upgrades like flooring or windows are not unusual, but a full-on fixer-upper is usually fraught with pitfalls and disappointment. After all, you’re going to be putting a good chunk of change down on this place and you want to be making money as soon as possible. Extended renovations will put that off for much longer, keeping you from hitting any sort of profit margin for quite some time.
Following these tips is a great start to your real estate investment journey. For further assistance in buying, selling, or operating a rental property, contact our team of experts at GIL Property Management & Sales today!