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Three Tips for Finding and Purchasing a New Rental Property

If you are looking to purchase an investment property here in Waco, TX, you may be wondering where to begin! With countless options to choose from, determining which rental house to buy is a challenge for even the most seasoned investor. Before you start your search, consider these 3 simple tips to help ensure you purchase a property that serves as a source of income, and not a money pit!

1.) Set and stick to a realistic budget, purchasing within your means.

Markets can be competitive, so knowing what you can afford (whether you are financing or paying outright in cash) is key. Remember to take property taxes and property insurance into account, as both will likely increase each year. In addition to your standard purchasing budget, you will need to have contingency savings in place to handle unexpected repairs as well as tenant vacancies. If you are looking to purchase a home at the top of your budget, scale back. Search for an investment property that is “less than” what you can afford so that you do not place yourself in a compromising position.

2.) Determine what your monthly rent will be, and make sure it is realistic.

The amount that you can charge for rent is based on the home’s condition, and location, as well as the overall demand for rental properties within a specified region. You want to make sure the rent you will be receiving works within the budget you have set while considering a reasonable, annual rent increase. One of the biggest mistakes landlords make when purchasing a rental property in Waco, TX, and elsewhere, is searching for a home with an unrealistic rental income expectation in mind. Without understanding the market, and what the home will actually rent for, landlords overextend themselves, losing money with each and every lease.

3.) View homes through a “long-term” lens, determining whether a full renovation or turn-key purchase is in your best interest.

When you walk through homes to purchase, look beyond what you see and consider the long term value. Sometimes a fixer-upper could net you more long-term than a home that is turn-key if you have the capital on hand to renovate (and other times ready to rent is best). Regardless, a deep understanding of real estate trends and the needs of targeted tenants is what’s necessary. For example, students at Baylor University may be more interested in being near campus or downtown (with multiple students splitting rent), whereas single-family renters would want a home within a good school district with a well-manicured yard for their kids to play in.

For more reading on this topic check out this article at Investopedia: 15 Tips for Buying Your First Rental Property

As a locally owned and operated Property Management company here in Waco, TX, we are dedicated to helping our landlords maximize the return on their investment. With over 30 years of expertise, we take care of all of the details so you don’t have to! Contact us today to learn more about the comprehensive services we offer: 254-651-0576. We would love to hear from you!

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