Rental Property Investing 101 – Tips for Future Investment Property Owners

Here are tips to get started.

• Go for the long haul — rarely do people increase their wealth by owning property for short periods of time. Long-term investing in cash flow-producing assets like real estate is the way to go.

• Don’t’ give up your day job! – You need a solid job to be able to save money for a down payment and be able to obtain financing to buy properties.

• Buy cash flow-positive properties – If you don’t understand why to do this, you might want to skip real estate ownership. See “What is a Good Real Estate Investment” article.

• Buy a property that you love! – The more you love the property for all the right investment reasons, the better chances you’ll own it long term.

• Skip the prize properties – Prize properties have negative cash flows and are NO prize, it’s the moderately priced properties that are the real prizes.

• Buy as a personal residence to change to rental – Buy properties in life that make good rental property investment sense and first live in them as a personal residence. When you buy as owner occupant, you get the best financing and can put down a smaller down payment if you so desire. Plus you learn the property characteristics, issues, and can fix issues so they won’t be issues once you make it a rental. Then, move out after one to three years and into your next personal residence that will become a rental property a few years later. This also ensures you will only buy properties in areas where you are willing to live, and that’s very important to do as a real estate investor.

• If it sounds too good to be true, it is! – Real estate is high risk as there are many things that can go very wrong. If it sounds too good to be true, be very careful. Once you take ownership of the property, you have to correct the problems and issues, or live with them.

• Fully educate yourself for 3-6 months – Talk to other people who own properties, read books, go to the local real estate investment clubs, etc. The better you educate yourself, the higher the chances you will take the proper steps to reduce your risks and make smart and safe decisions.

• Buy properties in good shape – Fixer-uppers are money pits and rarely sell at a large enough discount to compensate for all the work needed. Buy properties that are as close to rental ready as possible. A great move, if possible, is to buy a property with a good tenant already renting the property!

• Be conservative on your expectations – Always overestimate the amount it will cost to renovate a property, underestimate the rental income you will earn, and overestimate the expenses you will have to pay. Then, when you blow it out of the water, you’ll have a big smile on your face and be able to gloat to all your friends!

• Stay away from high vacancy areas or declining cities – Buy properties in nice, moderate, working class areas where there are not too many foreclosures, empty properties, or in a city or area that is in decline.

• Start young, but not before you are settled in a particular city – You want to start early, but make sure you’re somewhat settled before you take on this big responsibility. Have fun when you are young, there is still plenty of time to get rich on real estate. Just start saving your pennies for that first down payment.

• Death, taxes, and…. – Those two items are guaranteed in life. But, there is one more item if you are a real estate investor, and it’s 100% guaranteed: If you own real estate, you will feel pain along the way. Things will go wrong, but you will recover and will likely look back on the journey with fondness when you retire early.

• And let’s end where we started, once again with the most important item in real estate investing:

• Go long! – Long-term ownership will give you the highest chances of entering retirement with a nice rental property cash flow stream. And long-term ownership equity gains will compensate for the hassles and issues you have along the way.

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Permalink Reply by Melissa Stewart on October 20, 2014 at 7:01pm

I'm hitting the 3+ month mark on learning.. Excited but scared to make that first move... Thank you for putting that out there..Icant wait till I make that 1st deal.. On my way to new beginnings!