If you’ve been looking for a stable, long-term investment in Tulsa, residential rental homes might be the investment you’ve been looking for. Nonetheless, an investment property is not necessarily the same as a residence. To make sure that your first investment property is successful, here are a few things you should take note of. Here are the basics that you need to know about buying investment properties. If you want to buy your first residential rental property, this guide will be of great help to you!
How It Works
The concept of buying an investment property is a pretty straightforward one: investors purchase a property with the intent to lease it to a tenant. This buy-and-hold model is one of the most common ways that real estate investors start their property portfolios. However, there are a few disparities in buying your primary residence and your rental property.
A common mistake for first-time investors is this: look for a house and then decide to want to live in it. This is not very wise since an emotional attachment to the house can get in the way of the investment. Instead, investors use a set of calculations and market comparisons to find and evaluate properties to buy. There are some key figures you should be well versed with. These are the fair market value, the fair market rent, and your expected return on investment (ROI). Being able to distinguish the difference in properties in the current rentals of your area will lead you to discover which ones will make for profitable rental properties.
Another way that buying an investment property is different from buying a primary residence is financing. What most investors find challenging about financing an investment property is that it usually requires a 20% down on the mortgage. After making your down payment, don’t forget to save some cash for the closing costs, as well as repairs and other necessary expenses for the rental to welcome its first tenant. This is why it’s important to get a head start on the financing process — so that when you come across a rental property that you want, you can immediately make your move.
What to Look For
It’s wise to already have an idea of what features people generally want in a rental property. For example, you should know what they want for the location, size, amenities, and condition of the property and details about the local rental market. Figure out what type of people are renting single-family homes and what they might be looking for in rental homes. You can find out what kind of renters you might be having and what they look for in a property, by researching and talking to rental property experts, real estate agents, and other housing market experts.
Now, you can start looking for bargains. To help maximize your monthly cash flows and, eventually, your resale value, rental property investors typically look for properties sold below market value. Safe to say that this will mean that the property is older and probably in need of renovations and repairs. Don’t forget to take these repairs into account when plotting out your operating budget.
How Long Does It Take?
There’s no set time period when it comes to buying a property. It will be a case-to-case basis for every investor. Whether it takes a few months to over a year, what’s important is that the decision is thoroughly processed. The average time to close on a mortgage in 2020 was about 60 days, but that’s without the additional days spent on searching which property to invest in. You have to factor in a lot of variables; that’s why it’s different for everyone.
Do yourself a favor: avoid rushing the process so that you avoid feeling pressured. There’s no set deadline on these kinds of things, especially because they’re big investments. While every property will take time, you can make use of that by really going through your options and finding which one suits your needs. But, if you put in the time and research, you will be able to arrive at a reasonable bargain, and you will end up more satisfied with your investment.
If you are in the market for your first investment property, the right people can really help you get the best property. Why not give Real Property Management Tulsa a call? Our team of Tulsa property managers helps investors determine fair market rent, perform comprehensive assessments on potential rentals, and even help you locate off-market deals. The more you know going into your first deal, the more you can become a successful rental property owner. Contact us today!
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