Are you ready to invest in your first rental property? Follow this guide to buy your first rental property and get started as a landlord. Learn about choosing a city, preparing to buy, and how to select and manage tenants.
If you’ve done all your research and learned everything you can about the basics of real estate investing, being a landlord, landlord-tenant law, and how to create positive relationships with tenants, you may only be left with one task: buying your first rental property. This is a big step, and often one of the first major steps you will take in becoming a landlord. There is a lot to consider when buying your first rental property, but it is an exciting process that shouldn’t warrant as much worry as it often does.
While it may seem complicated and stressful, buying your first rental property is easier than you might think. You will first select your target city, then select a property to prepare for and make the purchase. After that, you will begin the process of managing and operating your small business. Here is the definitive guide on how to buy your first rental property.
Select Your Target Area
Selecting a good city to start your business in is essential to your success as a landlord. Fortunately, every city has benefits that can be gained by investing in it, but not every city is friendly to new landlords. Large coastal cities are often very expensive to get into, especially in states like New York or California, but they can be highly rewarding as they are highly desirable areas that many renters will pay a lot of money for.
Learn more: 5 Worst Cities to Buy Your First Home or Investment Property
Consider options from both the affordable areas of the United States and the expensive ones, and determine which suits your needs the best. Remember, it is always possible to move into these larger municipalities when you become established. If you do choose to go this route, you might benefit from choosing smaller, less expensive cities close to but outside of your target market to start. A small town in California that is within driving distance of San Francisco, for example, may be a perfect place to start if you want to eventually expand into the city itself, as many people will choose areas such as that if they want to work in San Francisco.
Learn more: 5 Best Cities to Buy Your First House or Investment Property
Prepare to Purchase
Preparing to purchase a rental property is an extensive process, beginning with learning all the laws in your area that pertain to your business and ending with actually selecting a property. Consider the financial aspect of owning a rental property, as the expenses are different than those of a homeowner. Additionally, you must consider the legal landscape of your chosen area and whether it is something you can handle keeping up with, as landlord-tenant laws change frequently. Finally, there is an emotional aspect to being a landlord, which needs to be measured, as allowing your emotions to control your decisions can cost you money and harm your business in the long-term. It is important to ensure that your decisions always come from a place of strategy and logic, and that your personal feelings do not get in the way of making those decisions.
Learn more: How to Prepare to Buy Your First Rental Property – Video
Develop a Lease and Find Tenants
Here is where the actual landlord work begins. You will develop a lease agreement that your tenants will all be expected to sign and abide by. When creating this lease, it is often advised to speak to a lawyer with experience in landlord-tenant law to ensure that your lease covers as many possible problems as you can predict.
Your lease will be your guide to resolving any disputes between you and your tenants, and starting out strong with a good lease that a legal professional has assisted with is the best way to set yourself up for success. Should you have any issues with your tenants, you can refer to the lease’s rules, which should cover a variety of potential problems. Should you have any issues that are not covered by the lease, however, you can discuss amendments with your tenants or update your lease between tenants.
Learn more: Differences Between Rental Agreements, Leases, and Subleases
Begin Management
Once all of these steps have been completed, you can begin managing your rental property. Property managers are an excellent resource for this process, but many small landlords start out self-managing their properties. Self-management is a good way to start, but property managers and property management tools are highly beneficial for landlords who want to scale their business or automate it so that they can turn their focus elsewhere.
Learn more: Your First Steps to Successfully Self-Manage a Rental Property
During this process, it is important to be mindful of scams and other nefarious activities that may cause you trouble. Be sure to be aware of potential scams and check in on your properties regularly to ensure they are in good shape. Remember to give your tenants a heads-up before you perform inspections, as many states have required notice periods.
Learn more: Avoiding Rental Scams as a Landlord – Video
Final Thoughts
With this guide, you should have no trouble buying and running your first rental property. You should be able to create and expand your business with ease, which will allow you to purchase more properties and scale your business as much as you want. Remember to always prioritize property maintenance to get more out of being a landlord, keep your property looking like new, and reduce tenant turnover.
