Becoming a landlord can be a lucrative investment, but it also comes with its challenges. From choosing a property with good potential to fixing outstanding problems to making upgrades that draw more interest from prospective tenants, there’s a lot of thought and work that goes into owning a profitable rental property. To ensure that you don’t waste your time, money, and energy, here is some advice to consider if you are planning to purchase an investment property.
Your first step to creating a rental business is to select a business structure that works for your needs. Many property owners choose to create a limited liability company because it’ll protect their assets, and owners can gain tax advantages as well. Fortunately, setting up an LLC is a surprisingly simple process. Most states only require five steps, but it’s often easiest to just hire a formation service.
Making a Good Purchase
The first step of being a successful landlord is buying a property that has the potential to be a worthwhile investment. This starts with getting your finances in order. Make sure you’re not strapped with a lot of outstanding debt and that you can afford the down payment, mortgage, taxes, and all the other expenses that come with an investment property. You can purchase a great property, but if you can’t afford to maintain it and pay the costs, you will end up in a stressful financial
Along with finding a property that you can afford, Investopedia explains that it’s important to choose one that’s in a good location. Think decent and/or up-and-coming neighborhood with easy access to essential stores, entertainment,recreational activities, schools, and so on. Since it’s your first investment property, you also may want to carefully decide what type of property to go with (e.g., apartment, condo, house, etc.), as it will make a difference in how you manage it.
Getting the Right Appliances
There are certain appliances that every rental property should have. If you have a vacation rental, you will want to offer guests with a few extra features to make their stay more comfortable. However, even with a long-term rental, there are basic appliances to outfit your property with, such as:
Along with ensuring your property has the right appliances, you will also need to consider any home improvement projects necessary to make the property safe, comfortable, and attractive. These projects can be as small as fixing a broken step or throwing a fresh coat of paint on the walls, or they can be as big as replacing the roof or remodeling the kitchen.
It’s good practice to estimate what improvements will be necessary before buying a property so that you can factor in the costs. Also keep in mind you’ll want repairs made while your investment is empty, so you won’t be receiving income during that time.
Building a Team of Professionals
Finally, you may be able to save money by doing a lot of the property management tasks yourself. But if you don’t have
any experience, it could end up costing you more time and causing you more stress than it’s worth, not to mention the burden of paying a professional to fix your mistakes. Hiring a handyman, cleaning service, and property manager can make the whole process go more smoothly.
Being a successful landlord requires committing time, money, and energy to the buying and managing process. Remember to choose a high-potential property that you can afford, invest in the right appliances and home improvements, and put together a team of qualified professionals to help along the way. In no time, you’ll be well on your way to building your investment portfolio!