Ensuring That Your First Rental Property is a Worthwhile Investment
by Sumona Real Estate 23 November 2022
There’s little mystery as to why so many passive income seekers invest in rental properties.
After all, amenity-rich properties located in popular areas can massively appreciate their value and bring in rental income for decades.
Of course, this isn’t to say that property owners won’t need to put forth any effort in ensuring the success of such ventures. So, if you’re eager to see solid returns on your first rental, put the following pointers to good use.
Subject the Property to a Pre-purchase Inspection
Prior to investing in a rental, you’ll need to assess the property’s true condition. While you may think that personal assurances from the current owner and personal walkthroughs are enough to accomplish this task, neither of these is an acceptable substitute for a professional inspection.
A meticulous inspection from a knowledgeable pro has the power to strengthen your hand at the bargaining table and provide you with the clearest possible picture of how well-maintained a property truly is. Furthermore, an inspection may also be a prerequisite for having the property insured.
An experienced inspector will be able to turn up problems you’d never think to look for, much less be able to readily identify. And once you have the results of the inspection, you’ll be able to assess whether this property truly represents a sound investment and/or amend any offers you were thinking about making accordingly.
Furthermore, to help make your decision easier, take care to obtain contractor estimates for any work the inspector deems necessary or strongly recommends. These estimates can prove helpful in determining how much you should offer for a property.
Make Necessary Repairs and Renovations
Should you decide to invest in a rental that requires a fair number of repairs or renovations, make sure that they’re undertaken in a timely manner. In addition to helping increase the value of the property, such work may be legally necessary for the property to be rented out. If your rental property is fully furnished you should consider changing new furniture, appliances or even buying a new mattress for Airbnb and holiday rentals. Most clients are captivated by the look of the property especially when they lay and sit on the bed.
When tackling repairs/renovations, make a point of only giving your business to contractors who are fully licensed and insured. You may think that working with unlicensed contractors is a smart way to save money, but this may ultimately result in higher costs and more headaches.
For one thing, licensed contractors are able to pull permits from cities and townships for jobs that require them. Undertaking certain renovations in the absence of the proper permits can land you in legal trouble and result in hefty fines, neither of which are things you want to be dealing with as a fledgling landlord.
Rental property investors based out of the Sunshine State would do well to carefully consider repair/renovation costs when exploring Fort Myers, FL real estate.
Research the Location Before Committing to Buy
An unfortunate location is among the most common contributors to an unprofitable rental property. Unsurprisingly, rentals found in areas that have lots of demand for housing, bustling local economies and booming populations tend to prove more profitable than properties found in areas with little housing demand, struggling economies and waning populations.
Even if a rental has an abundance of space and modern amenities, it’s unlikely to generate healthy returns if it’s found in an unprofitable area.
That being the case, you’d be wise to research the best suburbs to invest in before proceeding to purchase your first rental property.
Taking the time to do a deep dive into an area’s population size, projected growth, median income, property values, and rental rates will ensure that you have a solid understanding of how profitable a property is likely to prove, as well as how much you’ll be able to charge in rent.
Just remember – no matter how amenity-rich or well-maintained a property is, its location may severely hinder its ability to generate rental income.
You may find your first rental property to be one of the soundest investments you ever make. However, on the flip side, you may also find it to be among the most regrettable.
With such an enormous amount of capital at stake, it’s in every fledgling real estate investor’s best interest to put genuine thought into each property they purchase – especially their very first one. So, if you’re looking to turn your first rental property into a massive success, make sure to heed the advice outlined above.