How To Buy Your First Rental Property for Beginners - Biggerpockets 101 (EPISODE 1)

Bigger Pockets - The #1 Real Estate platform in the world, says buying your first investment property is a huge step in real estate investing. Investors choose to buy rental properties for financial indepence to retire early. If you want to invest in your first rental property in 2023, we've got you covered!

How To Buy a Rental Property
1. Assess your Readiness

Passive income?

Cash flowing effortlessly into your bank account?

Becoming a landlord is far from a walk in the park. It demands hard work and unwavering dedication.

You'll find yourself handling a myriad of tasks. From managing tenants and processing rental applications to drafting lease agreements and collecting rent promptly.

The life of a landlord is filled with unexpected twists and turns, such as untimely maintenance issues that demand your attention and resources.

2. Prepare for the Down Payment
This is something you need to be aware of: When buying a rental property, You'll need to put down a minimum of 20% of the purchase price, plus additional funds for closing costs, which typically range from 3% to 5% closing costs of the total price.

For example, if you're eyeing a property worth $100,000, you should aim to Save at least $25,000 to cover the down payment and closing costs.

Have cash reserves set aside for unexpected expenses that may arise, such as repairs, vacancies, and property management costs.

A general guideline is to Have savings equivalent to six months' worth of rental property expenses.

3. Choose Your Market
I hate to break it to you but when it comes to RENTAL PROPERTIES, there isn't a one-size-fits-all answer. I suggest you consider what you're specifically looking for and explore different options.

One key factor to consider is the rent-to-price ratio. Essentially, you want to Find a market where the average home price is low in comparison to the average rent.

4. Determine Rent Price as well as Operating Expenses
Here’s something I have learned as a real estate investor: Investing in an analysis report can provide valuable information on rental comparisons, demand, and more.

This way, you can make informed decisions and avoid the pitfalls of underpricing or overpricing your property. Aside from rent, consider your operating expenses.

These expenses can quickly accumulate and impact your profitability. They encompass maintenance repairs, online listings, apartment turnovers, tenant screening reports.

Keep in mind that the costs may vary depending on factors such as the property's location, turnover frequency and the extent of tenant screening.

Don’t overlook necessary repairs or cut corners on tenant screening. as these choices can have long-term financial repercussions.

As a landlord, your responsibilities extend beyond collecting rent; you must effectively manage expenses to ensure the property remains profitable.

Buying a rental property in your own name is a risky move that exposes you to unlimited liability.

How To Buy Your First Rental Property for Beginners - Biggerpockets 101 (EPISODE 1)\

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