How to Invest in Rental Properties as a Beginner

Rental properties are great investments. Being a beginner in the world of real estate can be very frustrating if you do not know some tricks of the trade, but as with anything worth fighting for, determination is the key to success. Follow the very basic steps listed in this article to get started in investing in rental property.

Instructions

Difficulty: Challenging

Things You’ll Need:

• money or financial source
• real estate agent (optional)
• carpentry skills or trusted carpenter
• patience

How To Invest In Rental Properties As A Beginner

1. Find a realtor. If you choose to work with a realtor in your search for rental property, choose one that has a good reputation in the community. You do not want to get involved with a realtor that does not have your best interest in mind. Choose a realtor that you are comfortable talking to, not one that intimidates you. Tell your realtor exactly what you are looking for in purchasing rental property and your spending budget. Some real estate agents may double as property managers and will agree to show and find tenants for your rental property, for a percentage of your rent, of couse.
2. Find a money source. Depending on the individual bank's policies, some banks will not loan money to you for purchasing rental property. The reason? Because you may not be guaranteed a renter each month. If you cannot get a loan from a bank, ask a trusted friend or relative who might be interested in partnering with you in this new business venture, especially if this person is a "handy-man", able to fix up the property.
3. Search until you find. Just because you find a house for a great price, it may not be the best deal. Hire a professional home inspector to check the property from top to bottom, inside and out. If it is built on a firm foundation, you have yourself a possible deal, but if the foundation is not sturdy, do not even bother with it. For your first rental purchase, avoid buying a house in need of a major renovation.
4. Prepare for repairs. In the world of rental properties, repairs are a major part of the game. Before moving in your first renter, repair and replace anything that needs a major overhaul, such as flooring or appliances. It is in your best interest to have appliances in your rental property. Most people who are shopping for a place to rent do not have their own major appliances. An added bonus to any rental property is a washer and dryer hook up. If your rental property is not washer and dryer ready, have the hook ups installed, it is fairly easy to do.
5. Be smart. If you are smart, you will screen your renters. Just like a job, have your renters fill out an application. On the application ask for personal and work references. Before making any promised commitments, check all references. Even though, by law, you cannot discriminate against tenants, you can have them agree to a set of house rules. For example, " no pets inside", "no parties", "no smoking inside."
6. Rent. Require a deposit of at least half of a month's rent. Some landlords require an up front rent payment of the first and last months rent to cover unexpected problems. Put the renter's deposit and last month's rent into a savings account, available to be withdrawn if both should be refunded to the renter when he decides to move out. If the renter leaves the property damaged, use the "deposit" to cover clean up or repair expenses. If the renter leaves the property without paying, the "last month's rent" will take cover that problem as well.
7. Sign a lease. In addition to the signed agreement of the house rules, have your tenants sign a contract for 3 months, 6 months or 1 year. This is to ensure that you will have a constant income of rent. If a tenant signs a contract for a year, consider giving a discount on the monthly rent.