6 Vital Steps for Buying and Managing Your First Investment Property

An investment property offers a pathway to generating passive income and expanding your wealth. As you embark on purchasing your initial property, you'll inevitably have inquiries regarding selecting the right house and preparing it for potential tenants. Here are six crucial steps to ensure the success of your investment property venture:

1. Emphasize Home Security in Various Forms:

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   • Home security stands as a critical consideration for many prospective renters. Enhancing the security of your investment property not only safeguards your asset but also provides peace of mind to tenants. Implementing a combination of low- and high-tech security features can be cost-effective. For instance, landscaping with shrubs or bushes near windows can deter intruders, while enhanced lighting contributes to reducing criminal activity. Installing a home security system is another option, albeit with associated costs averaging around $675, plus ongoing monitoring fees.
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3. Seek Out Desirable Features:

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   • When scouting for your inaugural investment property, it's tempting to solely focus on the price. However, to maximize your investment, ensure the property meets certain criteria. Location reigns supreme among tenant priorities, followed by amenities like parking availability, laundry facilities, and a spacious yard. While features such as an open floor plan and modern appliances can be upgraded later, an ideal location with access to local amenities holds undeniable appeal.
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5. Consider Professional Management:

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   • Managing an investment property independently can be time-intensive. Thus, engaging a management team or agency could prove beneficial. While there are associated costs, outsourcing tasks such as billing, paperwork, and property maintenance can justify the expense. Management fees typically range from 8 to 12 percent of the monthly rent, contingent on the scope of services required.
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7. Leverage Online Resources:

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   • Whether renting out a single-family home or an entire apartment complex, effective online marketing plays a pivotal role in attracting tenants. Potential renters heavily rely on online reviews and property websites for information. Failing to leverage online platforms and manage your online reputation could result in missed rental opportunities and increased turnover costs.
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9. Screen Tenants Diligently:

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    • While minimizing vacancy is essential, it's equally crucial to select tenants who uphold lease agreements and property rules. Employing legal screening methods such as credit checks, income verification, and reference checks is prudent. Additionally, outlining clear terms in the rental agreement delineating each party's responsibilities can mitigate potential issues.
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11. Set Rental Rates Based on Property Value:

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    • Rather than following market trends, establish rental rates based on the property's value. Typically, a monthly rent ranging from 0.8 to 1.1 percent of the home's value is standard. Conducting comparative market analysis in the area can aid in determining an appropriate rental price.

By adhering to these steps, you'll embark on a promising journey towards creating passive income through your investment property. With diligent execution, you may discover that property investment not only proves financially rewarding but also opens avenues for further investment opportunities.