Purchasing a Mission Valley single-family rental property for the first time can be an exciting venture. However, there is always a risk that an investment will pay off. Before making your first investment property purchase in Mission Valley, you need to know several things to ensure it will succeed. For example, you’ll need to decide who you wish to rent to. What type of rental property will you focus on? How will you finance your purchase? What follows is a discussion of these topics and other factors that can affect the success of your first rental property.
Define Your End Goal
Perhaps one of the first things to remember when purchasing your first single-family rental home is to set clearly defined end goals. Before you start your property search, you should think about what kind of investment property you want and what amenities you’d like it to have. For instance, you might be looking for properties in a particular location with a specific number of bedrooms or a minimum amount of space. You can also prioritize a particular renter demographic, such as college students or retirees. It will be much easier to locate potential properties that meet your needs if you have a good idea of what you want.
Prepare Your Finances
Apart from deciding what qualities you are seeking in a property, it is a good idea to prepare financially before you purchase an investment property. Before beginning your property search, experts suggest clearing out any personal debt and saving for a down payment. Reduced personal debt can help you get better loan rates, while almost all mortgage loans for an investment property will require a 20% down payment. Planning in advance for financing is also important, but be wary of high-interest loans or mortgage products that seem too good to be true. Getting prequalified for a mortgage with a reputable lender will allow you to grab investment opportunities as they emerge. Prioritizing your funds will provide the assurance you need to purchase that rental property.
Crunch the Numbers
After these necessary first actions have been executed, the search for the right property begins. Running a series of numbers on each prospective property, incorporating your margins, operating expenses, and expected return, is an important step in the search process. This is where a lot of new investors commit costly mistakes.
New investors sometimes forget to incorporate all of the expenses related to purchasing and preparing the rental property for lease, as well as ongoing property management, upkeep, and vacancy costs. According to professionals, a margin goal of 10% and a 6% return in your first year indicates that you have a profitable investment.
It is important to keep in mind that an investment property is just that, an investment. It is not recommended to develop an emotional connection to a particular property or let your emotions dictate your decisions. Furthermore, the property you buy is not necessarily a property that you would ever live in yourself. Experts in the field recommend choosing low-cost properties in high-demand areas for your first investment. But avoid fixer-uppers unless you have expertise with home renovations or know a reliable contractor willing to work for less than the overall cost. Your first single-family rental property should be viewed as the first step toward a long and profitable investment career rather than being the ultimate goal. Doing so lets you stay on track and ensure your investment properties are profitable.
Design a Management Strategy
In conclusion, don’t forget that buying a rental property is just the first step. To ensure that your investment is profitable, you need a practical management strategy in place. This is where hiring a great property management company can be helpful. As local market experts, property managers can help you find off-market investment properties, examine market conditions, set rental rates, and much more. More seasoned investors will advise you that engaging with the right property management company is essential in profitable rental property investing.
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