Buying & Protecting Your First Rental Property
When you're thinking of purchasing your first investment property in the Tampa Bay area, it's important to consider all your options and familiarize yourself with the buying process before investing in a rental home. For instance, you'll need to get approved for a mortgage, select a location for your investment property, insure the rental home, determine whether to hire a property manager and decide how you're going to protect the investment from theft and burglary. To explore the different steps you'll need to take to purchase, manage, and protect your first investment property, check out the following advice tips.
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1. Get Preapproved for a Mortgage
Setting your budget and visiting a mortgage lender to pre-apply for a loan are some of the first steps you must take when purchasing an investment property. According to HSH.com, financing options for rental properties range from government-backed mortgages like FHA and VA loans to conforming loans like Freddie Mac and Fannie Mae. However, the type of mortgage you'll qualify for will depend on the following factors:
- Your credit score and debt-to-income ratio
- Whether you have prior property management experience
- Whether you plan to occupy the property before renting it out
- Your down payment amount
2. Select the Right Location
Next, you'll need to select a location for your rental property. According to Neighborhood Scout, some of the best places to purchase property in the Lithia area include Fish Hawk, Boyette and Town Center. However, you'll also need to determine whether you're going to invest in a multi-unit property, single-family home, or condo—as this could play a role in the location you choose. Talk to your Eaton Realty agent about ideal locations, and check out vacancy rates in the neighborhood you're scouting to get an idea of how rentals fare and be sure to research average rental prices.
3. Insure Your Investment
After you've found an investment property that fits your budget and location preferences, it's important to purchase a landlord insurance policy that protects your rental home from financial losses that occur as a result of natural disasters, fire, and explosions. Some landlord insurance policies cover damages from vandalism and burglary as well, but you may need to pay a higher premium for these optional coverages.
4. Hire a Property Manager
Next, you'll need to think about how you're going to manage your first investment property. Unless you think you're up for the task of managing your rental home without outside assistance, it may be wise to work with a property management company. A property management company like Eaton Realty can help you to find reliable tenants and quickly fill vacancies, collect monthly rental payments, and maintain the investment property by making timely repairs and updates.
5. Protect Your Assets
Diving into the world of rental property ownership comes with a fair share of peaks and valleys. To ensure your personal assets are protected, and to help cover your budding rental business, be sure to register as an LLC with the state. Aside from asset protection, an LLC will bring numerous tax benefits. Since you're starting small, consider utilizing a formation company to help with paperwork and details.
6. Protect the Rental Property from Theft
There are a few different things you can do to secure your property and deter thieves and vandals from entering. For instance, several effective options include the installation of a home alarm system, motion-detecting lights, smart locks, and doorbell cameras like the Ring Video Doorbell or Nest Hello. If you're leaning toward a standard alarm system, note that the average cost of installation ranges from $700 to $1,900 — you'll pay more for a monitoring service.
If your budget doesn't allow for the installation of an alarm system, or you're looking to experiment with a few low-tech security measures, several affordable options include:
- Planting prickly shrubs and bushes near lower-level windows.
- Keeping the lawn, trees, and shrubs trimmed and well-maintained.
- Displaying a home alarm sign in the yard and on windows.
- Moving all valuables and possessions out of plainsight.
- Installing a lock on the mailbox and keeping newspapers from accumulating on the lawn.
There are many great benefits of investing in a rental home, but it's important to carefully select your location, housing type, and home security measures—especially when you're purchasing your first investment property. In the event that your investment property is damaged, vandalized, or you lose a tenant for any reason, a good landlord insurance policy will cover your loss of income—helping you to stay on track to achieving financial success.
If you've been thinking about purchasing an investment property, Eaton Realty agents can help you find one that meets your long-term goals. Contact us today!
Guest Authored by Katie Conroy at advicemine.com