Tips to Buy Your First Rental Property

Rental properties can be a great way to bring in some extra income.  However, you can't just jump in and buy several pieces of property, expecting a profit right away. You have to take your time, come up with a plan, and get started the right way.

Here are some tips to help you when you buy your first rental property.

Rent your own home when you move into another one. Many people become first-time landlords when they decide to move. Instead of selling their old home (for any number of reasons), they rent it out for a while.

Start small. Though you may want to go all in and buy a huge apartment building, you should start with a single-family home. Then, you can buy more properties as you get more comfortable being a landlord.

Don't be afraid to ask for help. It might be a good idea to shadow another landlord to really learn about the day-to-day management of a piece of rental property. It doesn't matter whether it is a single-family home or an apartment complex, it never hurts to talk to other landlords before you jump right in.

In fact, you may want to think about hiring a property management team. The day-to-day management of a piece of rental property can be much more than you ever imagined. Because of that, you might want to consider hiring someone to take care of it for you. Though it may cost you a little bit of money, it takes all of the stress out of being a landlord.

If you are buying a home with tenants, don't be afraid to ask about them. You have every right to ask the current owner and landlord about the tenants that are living in the property. You should be able to see their application and read their background check. Not only that, but you should also ask about their payment history.

You don't have to keep the tenants when you buy real estate that already has tenants. If you are uncomfortable having the tenants in your building, you can ask them to leave. However, you have to give them time to find a new place to live.

Buy a home that is already ready to be rented. While you may find a cheap home, the truth is that, if you are going to spend a lot of time and money fixing it up, it might not be worth it.

Instead, if you buy a home that is ready, you can have tenants in place within a week or two (instead of a few months). It is always nice to see income right away, instead of continuing to pour money into a home that needs a lot of work.

Choose a place that is close to amenities. If you live in a city, tenants are always looking for homes near bus and subway stations to get where they need to easily. You might also want to buy a place that is near a park because it will appeal to young families. If you are close to the shops, you will easily find tenants.

Don't forget about the math. Whether a rental home is going to be profitable shouldn't be a hard decision. You need to figure out what your monthly costs will be (mortgage, insurance, etc.) and make sure that the local rental fees are above that. You can't buy a home and try to rent it out for much more than other rentals in the area, or you will not be able to find anyone to pay your prices.

Don't make this complicated. Instead, make sure that you can make enough that you can make a profit (and have a little extra for any of the extras that might come along).

Make sure that you have a signed lease in place. You need a written lease outlining all of your rules and regulations. If not, how is your tenant going to know what is expected of him or her? Even better, please consult a lawyer when you are writing it up.

Hire the right professionals, at the beginning. Since there is a lot that goes into being a landlord, it is important that you seek help right away. You are going to want to have a real estate professional who is able to help you find a good place (or more). Many real estate professionals can also help you rent out the home.

You will also need a lawyer to help you draw up a contract to ensure it is legal. It helps to have one on your side if you have to deal with evictions or any other legal issues.

A good bookkeeper will make sure that you start your books off right (and keep them that way). Then, you won't have to stress when it comes time for taxes.

You should also connect with an insurance specialist. You must have enough insurance for your rental property. Simple homeowner's insurance may not be enough. In fact, you may want to have extra insurance for any accidents that may occur on your property.

Though you might decide to go out and buy a home to rent, it is not that simple. You should take your time and ask for some advice to avoid wasting your time or money.

It is also important to have the right professionals on your side. You will need a real estate professional, lawyer, and bookkeeper to help you get started. You should also have an insurance specialist to protect you against anything that could happen.

It also helps to start with single-family homes, especially ones ready to be moved in. This helps you bring in income right away. You may also want to find homes that already have tenants. If you are comfortable with them, you can immediately become a landlord!

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Previously published on Medium and/or Newsbreak.