So, you’re thinking about buying your first investment property. Here’s the thing: Real estate is one of the better ways to kickstart and/or build your investment portfolio, but profit is not guaranteed. Finding the right property, getting your finances in order, maintaining the property, and dealing with tenants or guests are just a few things you need to do, and these responsibilities require a lot of time, effort and cash. With that said, if you go into real estate investment prepared, your chances of being a successful landlord increase exponentially.
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In the meantime, keep these tips in mind as you get your plan together to buy your first property:
Go through the costs.
There are a lot of different costs involved with buying an investment property, and it’s essential to plan for these costs before you dive in. What money do you currently have on hand, and how much can you get with a loan? What price can you get the home for, and how much will you need to pour in for repairs and renovations? What about operating costs?
As HomeUnion explains, there are numerous hidden costs, like waste management and pest control, that you don’t want to overlook. Also, keep in mind that there are certain features that make properties more highly sought after than others; for instance, high-speed internet is a priority, so you might want to look for properties with access to 5G. Come up with a realistic budget that takes everything into account, and consider what you can expect to charge for rent to estimate if it will be a worthwhile investment.
Three percent is not going to cut it for your down payment on an investment property; lenders are more strict with a property you don’t intend to live in yourself. Mortgage insurance isn’t a thing with investment properties, so plan to put at least 20 percent down on your first property.
Since it’s your first investment property, it’s generally advisable that you avoid the highest-priced homes (this includes the purchase price and costs of renovations/repairs) so that your investment will remain relatively low. This means that even if you don’t get the profits you anticipated, you won’t lose as much as you would if you had more invested in the property.
Keep the property well-managed.
A lot goes into purchasing an investment property, but as RentPrep explains, just as much goes into managing it. Many first-time landlords and vacation rental owners opt to handle most, if not all, of the management themselves. This is a great way to save money and learn new skills, but it can also require a lot of time and effort. Therefore, if it requires you to take off time from work and/or causes you considerable stress, you might want to consider hiring a Miami property management company.
The ideal Miami property management company will handle the big and little stuff, such as marketing the property, vetting tenant applicants, addressing repairs and maintenance, collecting rent, and regularly checking in with tenants. If it’s a vacation rental you have on your hands, you want a similar service with a management company that markets your rental, handles all the bookings, makes check-in seamless, cleans between guests and offers 24/7 service.
Regardless of whether a property is residential or a vacation rental, some real estate investors choose to register their rental business as an LLC. Doing so provides distinct protections as well as tax advantages. Keep in mind if you choose this option, you will have to transfer your mortgage to an LLC, and given some of the necessary changes, it’s in your best interest to speak to an accountant or an attorney before you move forward with an LLC. If you decide an LLC is the way to go, formation in Florida is relatively easy, and you can tap into the services of an LLC registered agent to facilitate formation management.