Some people think that buying a rental property is only for the wealthy. But this couldn’t be further from the truth! You don’t have to be wealthy to invest in real estate – you just need to be smart about it and follow through on your intentions. The first plank in your strategy is to Buy a house for the price of a car! If you focus on buying multiple low-cost, high-value rental properties, you can create a great stream of income for yourself.
To start you on your investment journey, select an able coach who has traveled this road many times. MY SMART COUSIN, a Real Estate Investment Coach and investor who has bought dozens of houses for the price of a car, and in some cases, the price of a bicycle, specializes in guiding and directing investors and aspiring homeowners, particularly Black and Brown folks and women, in buying properties. Our coaches know how exciting and also unnerving taking your first crucial steps can be. We help you develop and implement a plan that meets both your investment and financial independence goals by creating a roadmap with milestones and personalized guidance every step of the way.
Building a portfolio that comprises multiple properties offers several benefits. It allows you to multiply your profits, and just as importantly, it enables you to build scale and stabilize your earnings through diversification. As with any venture, there are a few key things to keep in mind when making this type of investment. In this guide, we’ll go over everything you need to know before buying several rental properties. Whether you’re just starting or are looking to expand, read on for tips and advice!
WHAT IS AN INVESTMENT PROPERTY, AND WHAT ARE THE BENEFITS OF OWNING ONE?
An investment property is a real estate property— be it residential or commercial, or a vacant lot or move-in-ready house— that has been purchased to earn a return on the investment through rental income, the future resale of the property at an appreciated value, or both. Investment properties typically are not primary residences or second homes— although you are able to earn rental income from both— which can make it harder for investors to secure financing. However, investment properties can offer the opportunity to earn a return through both long-term rental leases and short-term ones. Before selling an investment property, consult with a financial or tax advisor as selling an investment property might trigger capital gains taxes, depending on the sales price.
There are many benefits to owning an investment property, including the potential for appreciation, the ability to generate income, and the potential to make a profit when selling the property. However, there are also risks associated with investing in real estates, such as the possibility of declining property values, the risk of damage to the property, and the potential for tenant default. As with any investment, it is important to do your homework before making a purchase.
HOW TO START PURCHASING MULTIPLE RENTAL PROPERTIES THE RIGHT WAY
Buying multiple rental properties can be a great way to build wealth, but it takes careful planning and financing. Here are a few tips to get you started:
· DEFINE YOUR PURPOSE: Your first and most important step is to determine your objectives for your multiple rental properties. Defining your goals upfront will help you make investment decisions along the way. For instance, if your objective is to hold the properties long-term and sell them after 15 years or longer, then your investment criticaría for your properties will differ from those used for a buy and flip. Alternatively, if you’re seeking passive cash flow with an emphasis on don’t-lift-a-finger passive, then you’ll want to engage a property manager. As the old saying goes, if you don’t know where you’re going, then any road will take you there. Once you know what you want, it’ll be easier to map out a plan to get there.
· FINANCING OPTIONS: You don’t need to have a ton of cash on hand to buy rental properties. There are several ways to finance your investment, such as taking out a loan or partnering with other investors. Leveraging someone else’s money can help you buy more property than you could on your own, and it can also help reduce your overall risk.
· FIND A REALTOR WHO FOCUSES ON INVESTORS: Ready to start building your portfolio of rental properties? Talk to an investment-focused real estate agent in your area to get started. They can help you find investment properties that fit your budget and goals. They can also help you narrow in on the best way to finance your purchase. Taking the first step today will put you on the path to achieving your long-term goals.
· FIND A MORTGAGE BROKER OR HARD MONEY LENDER: A mortgage broker or hard money lender who can lay out the steps to prequalify for financing can help you identify and secure funding early on. They can also assist you in finding the best loan products for your needs.
· COLLATERAL: If you already own one or more rental properties, you can use them as collateral to finance the purchase of additional properties. This will allow you to leverage your existing investment and increase your return on investment.
· CONSIDER A PARTNERSHIP: If you’re not ready to finance multiple properties on your own, consider partnering with another investor. This will allow you to pool your resources and reduce your risk.
With careful planning and execution, buying multiple rental properties can be a great way to build wealth. However, it’s important to do your homework and understand the risks involved before making any decisions.
TIPS FOR MANAGING YOUR RENTALS EFFECTIVELY
As a landlord, you have a lot of responsibility. Not only do you need to make sure your property is well-maintained, but you also need to make sure you’re complying with municipal, county, state and federal regulations. Additionally, you need to be proactive about collecting rent and handling tenant issues. Here are a few tips for managing your rentals effectively:
· PAY YOUR TAXES REGULARLY – Make sure you’re up to date on your property taxes, sewer charges and any other assessments that apply. This will help you avoid penalties and interest charges and ensure that you don’t find your property auctioned off or foreclosed on due to non payment.
· INTERVIEW PROPERTY MANAGERS – If you don’t have the time or inclination to handle the day-to-day management of rentals, consider hiring a professional property manager. Property managers can take care of everything, from marketing your rental to screening tenants to dealing with repairs and maintenance issues.
· STICK TO THE LAW– Be familiar with the laws governing landlords and tenants in your state. This will help you avoid legal problems down the road.
· ROUTINE MAINTENANCE – This includes things such as checking the appliances, changing the furnace filter and checking the smoke and carbon monoxide detectors. Getting in the habit of performing this work will help to prevent any larger issues from developing.
· INSPECTION – Inspect your rental units regularly, both inside and out. This will allow you to catch any problems early on.
· WORK TO ENSURE THAT YOU HAVE LOW TENANT TURNOVER – Decrease the possibility of tenant turnover by offering competitive rent prices and providing great customer service. This will help to ensure that your rental units are always occupied.
By following these tips, you can effectively manage your rental properties and avoid any costly repairs or vacancy issues.
FINANCING YOUR INVESTMENT PROPERTY PURCHASE
Admittedly, funding the purchase of multiple investment properties can be a challenge. Here are a few things to keep in mind as you navigate the world of financing your rental portfolio:
If you buy houses for the price of a car, then the need for a large mortgage or any mortgage at all might not be necessary. For more expensive properties, you’ll need to take out a mortgage for each property. This can be done through a conventional lender, such as a bank, or a private lender. If you go the conventional route, you’ll likely need to make a down payment of at least 20%. But if you go the private route, you may be able to get away with a smaller down payment. Just keep in mind that private lenders often have stricter credit requirements, so you’ll need to have a strong credit score (ideally 630 or higher) to qualify. Second, you’ll need to have reserve funds available to cover expenses like repairs, vacancies, and unexpected maintenance issues. It’s a good idea to have at least six months’ worth of reserve funds available before you purchase your first rental property.
FINAL THOUGHTS
If you’re thinking of investing in multiple rental properties, there are a few things you need to know. We’ve put together an investor’s guide to buying multiple rental properties that will walk you through the process step-by-step. From understanding what an investment property is and the benefits of owning one to finding the right properties and financing your purchase, we have all the information you need to get started. If this sounds like something you want to do, get started and keep us posted on how it’s going!
YOU CAN ALSO READ: WHAT ARE THE WAYS HOME BUYERS CAN AVOID CLOSING COSTS
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