How to Buy Your First Rental Property in Just 3 Easy Steps
If you’ve ever wanted to buy your first rental property, then you’re reading the right article. That’s because you’re about to discover my easy 3-step method for purchasing your first rental property.
And the good news is that this method works even if you have never evaluated an investment property before, sitting on tons of cash, or not the best negotiator.
Read on…
Step 1: Understand your Financial Goals
Many people who’re new to real estate investing don’t even realize that they need to do this step before they can put together their investment. And that’s why a lot of people who try to buy properties end up failing–they’re simply missing this crucial step.
So, the first thing you need to do is map out your expenses such as a mortgage, maintenance, insurance, etc. You’ll find that this part of the process goes much more smoothly if you apply these tips and tricks:
- Creating a list of monthly expenses whether they are fixed or variable
- Collecting all of your financial paperwork
- Make adjustments to your expenses
- Determine your budget for your 1st property
- Look into financing options if needed such as conventional loans, hard money loans, private money, or your home equity
Once you have a better understanding of your financial goals and framework, then you can move on to the next step…
Step 2: Build your Rental Playbook
The next thing you need to do is plan out your real estate purchase and find the right professionals to guide you through this process.
When I first started investing in real estate, I made a lot of mistakes. And now that I’ve helped others do it, I see a lot of people have a tendency to make the same mistakes. So let me share with you the top 3 mistakes and how to avoid them:
- Trying to find the perfect property. No property will have the bells and whistles you were hoping for. Every real estate investor I know has made mistakes. In order to avoid them, you need to decide what type of property suits your lifestyle. If you are looking for a short-term investment to flip, you need to have an analytical mind and build connections. If you are looking for a long-term investment, you need to have legal coverage for any tenant issues and patience.
- Not evaluating your location well. Find the locations that fit your lifestyle and capabilities. Most people start off with their local areas. Talk to the homeowners and realtors around that location and better understand the market in terms of pricing, rent averages, etc.
- Not collaborating with the right professionals. It’s better to spend a little bit extra to get the right team in place. Whether you need a mortgage company, real estate agent, or attorney, always hire the best and don’t skimp out because of payment.
Step 3: Research, Research, Research
At this step, you’re likely to evaluate properties in your market. So, what you need to do is establish guidelines and qualify each property to ensure maximum potential.
I still remember the first time I was doing this step and trying to buy multi-family property to buy-and-hold. I found a property that could give me nice cash flow and ROI, but after getting the home inspected, we realized that the property didn’t have “good bones” to it and wasn’t a reasonable offer. Here’s what you need to evaluate:
- Figure out internally or speak to your team if this is a good offer
- Always do a home inspection if you are a newbie
- Evaluate rehab expenses with your contractor
- Determine all financial aspects of the deal
You may encounter counteroffers from the sellers. Don’t sweat it. Go back to your numbers and re-evaluate. What you don’t want to do is jump into a property that doesn’t fit your financial goals.
And there you have it — a simple 3-step method for buying your first rental property. Now that you know how to build passive income through real estate, there’s just one thing left for you to do: take action.
So get to it, and soon you too will build financial freedom.
If you need help buying your first property, reach out to our team.
