Buying Your First Rental – Consider These Tips

first time landlord

Buying a property can have its own nuances that make even the most seasoned property owner think twice. But acquiring property—especially one that will earn you income—is one of the easiest ways that someone can build wealth and increase their net worth.

Consider these tips if you are looking to buy a rental property in these Louisiana cities: Monroe, West Monroe, Bastrop, and Oak Grove:

Research Your Desired Real Estate Market
While we want to buy in areas that we truly love, not every kind of home in your desired area is fit to become a rental. The local demand highly influences one’s return. For example, it might be easier to rent a one-bedroom condo than a five-bedroom house or a small single-family home right downtown than another in a rural neighborhood. It all depends on the renter market and what units match their
needs and income limits.

Avoid Pier and Beam Homes
When purchasing your first rental property, consider investing in a property with a slab foundation. This kind of property foundation better prevents pests from entering your home, has fewer cracks and crevices over time, and better water filtration than in pier and beam homes. In general, slab foundations are more durable because they tolerate the elements, settling, and the natural elements.

In addition, although a home with a slab foundation is more costly than one with pier and beam, they may save you money in the long run because of their durability and low maintenance.

Commit to a Landlord Role
Although rental properties are considered passive income, they come with additional property and legal responsibilities. As a landlord, you will decide how involved you would want to be—as being a landlord may mean something different to everyone.

Owning rental property comes with the same responsibilities as owning your homestead where you are:
– Paying your mortgage
– Paying taxes and insurance
– Providing timely maintenance and repairs

Some landlords are incredibly involved and serve as their renters’ primary point of contact. They may handle responsibilities involving simple maintenance, like swapping air filters.

Others may want to be more hands-off, hiring a property management company to oversee tenant needs, rent collection, and filling vacancies. That’s a decision the property owner must make before renting the unit to someone else.

All approaches are okay so long as the tenant’s needs are met, and repairs are made within a reasonable amount of time.

Consider the BRRRR Method
BRRRR stands for buy, rehab, rent, refinance, repeat. Many investors look at this method of acquiring real estate as a way to build capital in a very short time. It works because an investor will buy a unit that often needs repairs at an under-market price. They may take out hard money loans or work with partners to submit a cash offer under the listing price, which is typically a more favorable contract term for sellers.

When the property is repaired, it will typically appraise for much more than when it was purchased. Investors will then use this appraisal to refinance the property, using the extra cash as a down payment for the next one. This approach is effective in a hot market, where properties are bought and sold quickly with desirable profit margins. Renters will keep the mortgage paid—and, hopefully, in good shape.

Have More Questions About Rental Properties?
Kajen Rentals specializes in all things property management for investment properties. If you have any questions about acquiring or managing rental property, reach out to us today.