How To Buy Your First Rental Property
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How To Buy Your First Rental Property

How to Buy Your First Rental Property
By []A. Kappauf
Due to the present economy and the low prices on homes, the time to buy rentals could not be better. 99.9% of everyone interviewed who has rental properties say that there are some headaches that come with renting out properties, however, they all added that the positive aspects of having rental properties far outweighs these headaches. Now the question is how does one go about getting into this type of business?
The most important first step to real estate investing is to explore why you want to do this. What is your primary goal? Is the goal to pay off debt? Is the goal to bring in income to live off of during your retirement years? Is the goal money for college? There are many reasons why you might want to be a real estate investor, and whatever the reason, you must understand and stay focused on this goal. As stated above, it is not always going to be smooth sailing, but if you keep focused on the goal at hand, it will help you get through some of the hard times as they arise.
The next step is to figure out how you are going to actually buy the rental property. Although many people put in an offer and then try to find financing, it is much more efficient to visit a mortgage broker or lending institution and get pre-qualified for a loan. Find out in advance how much they are willing to loan you, and what the down payment requirement is. This will allow you to have a general idea of your targeted price range, which will save you time because you can simply ignore properties that are too expensive for your financial position. A good rule to remember is that if you can put at least 20% down you have a better chance of obtaining the loan.
Next, decide on your location. Make sure that the area you have chosen has growth potential. If not, then go look at another area. There are many issues to consider in this step, such as, is it possible to change the rental property from a single to multiple dwelling property? Like I mentioned previously, there are many foreclosed homes at this time that are selling below market value, so you must always ask yourself if a given property can be purchased at a bargain price. You will also want to consider whether or not you going to able to increase the rent annually, as well as the impact that small improvements might have on the property values within the neighborhood.
The final step is to get a good real estate agent and start checking out actual properties. Your agent will send you MLS listings, which you can then run the numbers on to see which ones make financial sense. You can then have your agent schedule physical property showings for those listings in which the preliminary numbers look good. Also, get in the habit of always soliciting feedback from your agent, as he or she will ideally have a lot of experience. Your agent can give you good tips on the best locations, as well as property pitfalls to avoid. Good luck and happy investing!
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