Investing in Rental Properties for Beginners

If you’re interested in investing in rental properties and want to become more educated on the topic, this guide is for you. Better understand your options and important considerations as you move forward.

One of the most important things to think about right away: Owning rental properties can have great financial rewards, but that doesn’t come easy. When you invest in rental properties it is an active or hands-on investment that involves a great deal of time.

There are steps you can take to find an investment approach that works for you. First, let’s start with exploring the different types of investments available.

Types of Rental Properties

When it comes to rental properties, you have options in the type of investment you make. Each type of rental property has its pros and cons.

Long-term Rentals

This type probably comes to mind when you think of rental properties: A home, duplex, apartment, or condo with a lease of one year or longer.

Short-term or Vacation Rentals

This typically involves rental for a few weeks or months, like a property you rent to vacationers or business travelers.

Turnkey Rentals

When you purchase a property that immediately generates income because it already has tenants or a backlog of vacation rentals.

Choosing the Right Rental

As you can imagine, each of the rental scenarios above comes with different needs and requirements. Plus, you need to understand how to find the right property in your market. That’s why it’s helpful to have professional guidance.

Talk to An Experienced Real Estate Agent

If you have the capital to invest, it’s time to talk to a real estate professional who not only has experience targeting the perfect opportunities but can also help you learn the ropes of what comes after your purchase. 

A great real estate agent will work to understand your needs and objectives, present you with the right opportunities, and help you efficiently move into the closing process. Remember this person can share their insights into the ins and outs of the market and what areas to target in your geographic area.

Location, Location, Location

When it comes to your target geography, always remember that location matters. Even if your target rental property seems perfect, take a step back and ask yourself if the location is ideal. Are there any transportation barriers? Does the street seem to get a lot of traffic or not enough? Is it in a dangerous neighborhood? Is the area too remote? These are all important questions to get answered before you move forward.

Know the Market

One essential way to get the answers you need is to become familiar with the market. Know who lives or travels to the area and where they spend their time. Identify the availability of your target rental properties within that specific area. 

Financing Your Rental Property

Let’s say you’ve identified your ideal market and have your eye on a rental property, but you need to finance the investment. Your real estate agent may be able to connect you with money lenders for rental properties. 

One important fact to know is that you’ll always need to put at least 20% down. You can find ways to fund the down payment if need be, including a home equity loan or crowdfunding, for example. From there, the process works the same as it does for a residential mortgage loan with escrow and title processing.

Screen Potential Tenants

When you’ve secured your target rental property and you’re ready to rent, it’s important to make sure you find good tenants. Candidates should always have a good track record of paying rent on time and keeping the property in good condition. This is one measure you can take to protect your investment. 

Consider a Virtual Payment System 

Another way to protect your investment is to make it easy for tenants to pay you. Today’s virtual payment systems even allow people to set up automatic payments, so it’s much easier to receive timely payments. 

Consider Hiring a Property Manager

Especially if you have multiple properties or a larger scale apartment complex, having a property management team can be beneficial. This team will handle most of the day-to-day involved with being a landlord, including vetting, lease agreements, payments, tenant complaints, repairs, maintenance, and more. This strategy does come with a cost, but it also can allow you to enjoy the benefits of being a passive investor.

Mattingly Ford Title Services

Ready to get down to business? Our team at Mattingly Ford Title has the experience you need to seamlessly close on your rental property and move forward with your investment.

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