No doubt about it, now is the time to make preparations to invest in real estate, especially rental properties. With the mortgage market plummeting and buyers going into foreclosure, there has been a shift in demand. More people are going to be looking to rent, and more houses are going to be coming up for sale. Further, mortgage rates are decreasing. My prediction is that over the next 1-2 years there will be more easy deals than many years past. So the problem is not going to be finding good deals, it is going to be buying into them. But hopefully, these few pointers will get you going in the right direction.
Stopped being Scared and Take Action!
This is the single biggest reason why people don’t ever become more than average. Everyone is afraid of losing money, or being destroyed financially, and just won’t take the risk. You have to just decide that you are going to make a bold move and step out there to make something happen. As I said before, the next year or two is going to be the perfect opportunity to begin buying rental property. Stop over-researching and mulling over the what-ifs and start taking steps to making it happen.
Shoot for 1%
In any deal you are looking at, be sure that however much you put into it initially, that the rent will equal at least 1% of that amount. I don’t just mean the purchase price, I mean all up front fees to purchase, close, and make any repairs to the property. You will find with vacancy, maintenance and hassle it just won’t be worth it to do a deal for any less.
Start Small when Buying Rental Property
Small house always rent easier than large houses. Look for 2/1 houses in good neighborhoods. Small houses plus the right location and price equals rental profits. I own and/or manage several houses, and the small ones are always easier over all. And you tend to make similar money. Maybe not quite as much as the larger houses, but compared to the risk, it is a much better deal.
Buy Rental Properties One by One
I’m not suggesting that you don’t buy a two property deal if it is really sweet, but don’t use all your time looking for the next deal when you have one in front of you already. This is especially true when you are just starting out. Real estate investing is risky, and you need to take it slow in the beginning, while you are learning the ropes. Often the people you are buying from or renting to will attempt to take advantage of you, and you need to be cautious. Going slow is the best option when you are starting out to learn, and see just what it takes to get a deal off the ground and producing.
Establish Industry Relationships
This one is huge. You really, really need a quality real estate agent and banker for starters. You need them to make sure your property fits the rental model you are looking for, how good the neighborhood is that you are looking to invest in, and securing the best deals. I highly recommend taking these professionals to lunch, to show them you are serious and want to to have a relationship with them, not just get the best deal possible and then go with someone else that shows a slightly better rate or terms. These relationships will pay off with referrals, and deals you didn’t even know were on the market down the road. Also, join the local real estate investor club in your area. You may learn something you didn’t know, but more importantly, you will meet people that can help you down the road.
Establish Tenant Relationships
Doing right by your tenants can get you in position to extend contracts, and even get referrals for new tenants in other properties you may have. I just recently had a call where one of my tenants asked me if I had housing for a friend of theirs. Relationships, relationships, relationships. They pay off in the long run.
Don’t Get Emotional
This can really cause serious damage to your business. If you let angry, grief, or any other emotion sway your decision making, you are in for a long, hard ride to poorville. Sometimes tenants can be so aggravating, but stop and ask yourself, “Will it really do any good for me to get mad and yell at them?” In almost every case, it just makes matters worse. Work with the tenant as much as possible, and if worse comes worse, write the eviction letter. But do your best not to burn bridges.