When it comes to building wealth and security, few things create this faster then buying rental properties. But just spending the money to buy the property is not enough, you have to know how to buy, what to buy and how to maximize your cashflow to keep it all profitable. From understanding how to do a property search for the right property to hiring a skilled property manager, there is so much more to rental properties then just collecting the rent. Here are a few important steps to get you started in the right direction.
Make Plans First
It isn’t enough to just say you are going to invest in rental properties and then plunk down the money for the first one you see. Before you even begin to look at what is out there, do your homework to establish why you are doing this and how you plan to go about it. What kind of investment property are you looking to buy? This may be governed by how much you have or are willing to spend.
Look at the various neighborhoods and think about which kind of area you want to invest in for this. Be sure to look into what the average rentals are going for in that neighborhood. Not all rental properties make money for the owner, or at least not at first. Think about the ROI (return on investment) you are hoping to make from this property and how long you are willing to put money in before you see that return.
Arrange Financing First
Unless your rich uncle left you a legacy in cash, you are going to need to arrange a mortgage for that rental property. Don’t leave this until you have found the right building, make this arrangement first. Since you have done your homework (see first step) and know how much you need and what your expected ROI should be, you can bring this information to a bank.
Getting financing for an investment property has very different rules and expectations from when you negotiated with the banks for your home mortgage. So, set some time aside to go into your bank or one that you choose and discuss this all with them.
Finding the Right Property
Now that you have a realistic plan in place and your financing secured, it is time to find the right property. This is when finding the right realtor becomes a crucial next step. You will want someone with commercial property background, young enough to be hungry but experience enough to be an asset. You can also do a search online through one of many speciality realtors that can help you zoom in on the right kind of property for you. Websites you search on your own might be a good start, but since they don’t give you all the right kind of information, you will need a seasoned professional on your team to find the property that fits your needs.
Follow these important steps and you will be well on your way to finding the right commercial property that can be both an investment tool and a retirement plan. Many investors find that once they buy one property and have a good team in place, they are ready to get the cash flow going and move on to the next one. Use this first investment as a proving ground for your research and your team’s skills and you may soon find yourself the proud owner of a portfolio of great investment properties.