Buying rental property is growing as a more popular (and lucrative) method of investment. Many also use it to further diversify their portfolio. I'm sure it's why you're here - educating yourself on the topic to find success in this market.
Yet, caution can be advisable for potential beginner rental property investors. Here are some tried-and-true methods that experts have imparted for rental beginners.
Tip 1: Buy What You Know
Warren Buffet, a billionaire investor and one of the richest men in the world, is famous for telling people to "buy what you know." By this, he means not to buy into investments, such as specific rental properties, if you don't understand the business model.
If you don't fully understand a turnkey property in Presidio, don't invest into it. Instead, consider long-term apartment complexes that you understand better. Buying what you know allows you to be more successful in your business venture and get the most out of your money.
Tip 2: Budget Well
When buying and managing any property, a budget gives you more control over your rental. This includes getting pre-approved or pre-qualified for a mortgage loan, calculating operating expenses such as insurance, maintenance, and HOA fees, and being prepared for financial emergencies.
Tip 3: Understanding Real Estate Taxes
Understanding taxes involves both property taxes and tax deductions. Let's unpack what this means.
Tax deductions are a huge part of rental property management, allowing owners to save money by writing off expenses like mortgage interest, repairs, operating expenses, and even depreciation. If you enter the rental discussion with a firm grasp on how taxes and tax deductions work for these properties, you'll be a step ahead of the competition.
Tip 4: How to Be a Landlord
The truth is, not everyone is cut out to be a great landlord. If you plan to manage your property actively, you'll need to understand and prepare to be a professional landlord. Your tenants (and your pockets) will thank you.
This takes on a variety of different meanings. You need to treat your tenants with respect and dignity without crossing into friendship. Treat them well while maintaining distance for the optimal landlord/tenant relationship.
You'll also need to be comfortable vetting prospective tenants. Don't break any discrimination laws, but make sure your tenants will be reliable and true to the contract they'll sign.
Tip 5: Acquiring Tenants for Your Rental Property
You'll hear many CEOs describe customers as the most important aspect of any business, and rental properties are no different. You'll need to advertise, market, and sell to specific customers to get their business.
Whether you're investing in that flashy vacation home in the Financial District or in an apartment complex in the Bay, you'll need to fundamentally understand your customers to gain them as clients.
Ready to Invest?
These expert methods give great advice to new investors who want to break into rental property management and investment. Whether you're ready to invest or would like to learn more, check out our website for more information! We've got the best resources for all your rental property needs.