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How Do You Know You Are Ready For Buying Rental Property?

So, you want to delve into buying rental property and make big bucks in the real estate world this year?

You want to be a successful real estate investor and make every investment in your portfolio profitable. For whatever reason it may be, investing is a great way to earn passive income and gain financial freedom in the short-term as well as long-term. However, do not be misled into thinking investing success stories can happen overnight, there are many logistics involved on top of hard work and dedication. The housing market in 2017 is looking sunny side up with many positive economic indicators which are incentivizing investors to take advantage of the strong market conditions and invest heavily across the US. With a growing economy, affordable interest rates, and more lenient credit qualifications, investors are seizing this opportunity to invest in rental property in strategic locations across the country to reap positive cash flow returns on their investments. Mashvisor gives you a bird’s eye view of all the hot rental properties across the US in an instant.

6 Indicators You Are Ready For Buying Rental Property

1. You Are Not Risk-Averse. You Know the Higher the Risk, the Greater the Return

You are here because you have a keen interest in investing but hesitant enough not to jump all in and take on the inevitable risk that comes along with investing and buying rental property to start your business. You cannot be risk averse in real estate if you want to make lots of money and gain financial returns in a big way. If you take on bigger risks in your investment property, you are sure to gain higher returns. If you play it safe, you can reap steady stream of cash flow but it won’t make you a millionaire. This is the first step, TAKE THE RISK and know what you are getting yourself into.

Know the potential risk involved in buying rental property, such as;

  • Debt risk; debt risk can lead to foreclosure
  • Cap rate risk; a small movement in a cap rate percentage can have substantial effect on the property’s value.  
  • Tenant risk; mitigating vacancy and recognizing bad tenants makes all the difference when it comes to your bottom line.
  • Physical asset risk; mitigate physical asset risk by getting a professional examiner to inspect the house before purchase.
  • Market risk; the real estate market is known for its ups and downs and ever changing supply and demand.
  • Geographic risk; the value of any property is dependent on its location i.e. the better the neighborhood, the higher the property’s value.

2. You Know the Market and Identify Great Deals

This is a no brainer, you cannot excel in doing anything if you have no prior background or knowledge on the matter. As an investor, you must keep up with the ever changing real estate trends and market conditions. The housing market is in correlation with the economic and market trends i.e positive economic factors grow the real estate market and create more demand for selling and buying houses. Good investors assess the market, examine the location/neighborhood, run thorough inspections of the property of choice, run deep analysis on the property using key metrics such as cap rate and cash-on-cash return. Good real estate decisions are never made on a whim, they are calculated and strategic. If you can assess and identify great investment deals, you are definitely ready for buying rental property.

3. You Have a Savings Fund to Mitigate Risk

Unexpected expenses are inevitable when you manage rental property and it goes without saying the importance of having financial security to mitigate this risk. Just to give you a better idea, here are few examples of these hidden costs;

  • Maintenance issues
  • Bad tenants
  • Vacancy
  • Hidden tax fees

4. You Have a Long-Term Plan and Not Buying Rental Property on a Whim

Another no brainer! If you want to reap financial success in real estate, you must construct a long term plan. Have forethought and do not get suckerd into making small financial gains over a short period of time as opposed to reaping higher returns over the longer term. Buying rental property is a smart investment plan that is sure to make you money indefinitely if you play your cards right.

5. You Have Your Finances in Check for Buying Rental Property Today

Did you talk to your lender aka bank to discuss finance means? Does your credit score qualify you to get a loan? If you cannot answer these questions, then you are not ready to invest. However, if you have your finances in order today, then you are most likely ready for buying rental property.

6. You Have Guidance or/and an Expert on Your Side

It does not hurt to have an expert aka real estate agent on your side to guide you to successful real estate investing. Real estate agents can make your life a lot easier and help you choose the best rental properties in the area of choice. Do not hesitate to reach out and acquire guidance and knowledge before closing the deal on any potential investment property. With real professional guidance on your side, you can most certainly be ready for buying rental property.

If you tick all the boxes and are ready to invest in real estate, sign up for Mashvisor today. With its real estate investing tools and extensive market data, you’re sure to find the best deals on investment properties anywhere in the US.

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Victoria Daibes

Victoria is an experienced content writer who enjoys writing about all aspects of the real estate market and industry.

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