Here are three steps to toward landing your first successful rental property, because lets face it – you need to take action. Instead of getting bogged down in where to start I’m going to lay the initial steps to get rolling toward your goal of being a rental property owner!
Rental Investing 101: Three Steps to Your First Deal
Step 1.) Find Your Market
In my opinion it is a bit easier to start in your local market, however it is not a must. You may live in a place where the numbers don’t work – no deal is always better than a bad deal. Go outside of your local market if need be.
Once you have zeroed in on a market be sure to get an understanding of what areas are more desirable than others. What are average rents for the area? Are there spots with a lot of crime, etc etc.
Reach out to local real estate agents and other investors to get feedback on these items. Whether it’s calling an agent inquiring about the area or going to a local Real Estate Investors Association (REIA) meeting to pick other investor’s brains – gain whatever information and feedback you can.
Step 2.) Analyze Deals (Run the Numbers)
This is actually one of the most important pieces when acquiring rental properties. The bottom line is if the financials don’t show positive expected cash flow then there is no point in pursuing the deal.
We are not getting into rental property investing to lose money each month, right? Quite the opposite.
I always run the numbers with a rough estimate of rent, purchase price, taxes, insurance, etc. to see if it’s in the ballpark of the cash on cash return I desire. If not, it gets crossed off the list.
Be sure to use the ScaredyCatGuide Property Calculator to analyze deals. It’s what I use to analyze all my deals.
Step 3.) Build a Team/Network
Be it a handyman, contractor or property management firm. You should be getting references and vetting out these service providers before you close on your first property.
Let’s say your first property needs some rehab to be rent ready? Well, it is best to get estimates of those costs during your inspection period to see if it wrecks your numbers, thus turning it into a bad deal.
Plus, if estimates are within the cost window for the deal to work – you want to schedule the rehab with your contractor so they can get to work the day you close. Like they saying goes: Time is Money.
So there you have it – three clear steps to get you toward closing your first deal.
Quick tip: You should get an idea of how much financing you can secure to not waste time looking at properties out of your price range. Most lenders will help you with this by doing a quick pre-qualification.
If you want a more hands on experience to start your real estate investing journey: Check out the investing in rental properties video course. It includes two strategy calls with me, the ScaredyCatGuide!