Author: Katie Conroy is the creator of Advice Mine. She enjoys writing about lifestyle topics and sharing advice she has learned through experience, education and research.
Investing in real estate is a great opportunity to begin your investment portfolio or add to your existing one. But if you don’t know what you’re doing, you can end up getting into a serious financial mess. For example, buying a property on a whim or without having the necessary information can result in much more money and work than you bargained for, at which point it’s more of a burden than an opportunity.
That’s why it’s important to learn as much as you can about real estate investment and to have a basic understanding of what it’s like to manage a property. If you’re considering purchasing your first rental property, consider these tips before you make any big decisions.
Carefully research your first property
One of the most common mistakes first-time real estate investors make is purchasing a bad property. This could mean anything from buying a rental in a poor location to getting one that’s too difficult to manage.
In general, location is essential, whether you’re investing in a short-term or long-term rental. For instance, you want to make sure it’s a decent neighborhood and that there are nearby activities that will appeal to your target tenants. Also, it can be best to choose a single-family property for your first investment, since they are typically easier to keep clean and in good repair.
Make sure you can buy the property
Another quick way to make a bad investment is to purchase a property when you’re not financially prepared to do so. If you have major outstanding debt, such as student loans or a significant portion of your primary mortgage, consider paying those off before investing in real estate. Also, make sure you can afford the down payment, operating costs, and other expenses associated with a rental property.
Boost the value
Part of managing a rental property successfully is making certain changes that will raise the value of the property. For example, updating the kitchen is one of the best ways to boost value. While minor kitchen remodels average about $22,000, it can make a big difference in attracting tenants and add significantly to the resale value.
Replacing vinyl floors or carpet with wood floors can also add a lot to the value of your property. Plus, tenants typically love the warmth and aesthetic quality provided by wood floors, and it’s pretty easy to keep them clean. And you can find many options for affordable hardwood at your local building supply outlet. However, it can get quite a bit more expensive if you need to get rid of old floors, fix the subfloors, and/or remove heavy furniture. If you use an engineered or exotic wood it can raise the price as well.
Make any necessary repairs
Along with making home improvements, it’s important to handle any repairs necessary to make your property safe and functional. This might include the following (but is not limited to):
- Fixing broken steps and floor tiles.
- Having roof leaks repaired.
- Replacing broken or missing siding.
- Making sure the driveway and walkways are in good condition.
- Any structural issues (e.g., roof, foundation, walls).
- Any plumbing and electrical issues.
- Ensuring the HVAC is working and well maintained.
It’s also important to make sure your property stays well maintained and clean, including the interior and exterior of the home. Many landlords find it worthwhile to hire property managers, landscapers, house cleaners, and so on.
In order to increase the chances of your first investment property being successful, be sure to learn what you can, and take any steps necessary when buying the property. Carefully choose the property, ensure that your finances are lined up, and make changes to improve the value, safety, and function of the home. Implementing tips like these can make the difference between having an enjoyable experience and a difficult experience.
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