How to Find a Rental Property
by Jared Newman
There are millions of properties available on the market, but it can be a challenge to find one to purchase and rent out to a tenant. The first step is deciding where you would like to buy.
If you are considering building a massive portfolio, it will be simpler if you look for a property within driving distance that you can manage on your own.
If you choose to search for properties in other areas, you will need to pay other people to manage the property or you will need to obtain help from locals to manage the property yourself. If you choose the former strategy, then your profit margins will be reduced. However, if you choose the latter strategy, then there will definitely be risks if you do not know anyone local whom you are confident you can trust.
Once you have decided which city you want to buy a property, it's time to pick a type of property. If you are starting out with your first purchase, it is will be easier to begin with a residential property (1-4 units) than a multifamily building with dozens of units.
A condo can be a safe investment because you are less susceptible to major damages to the property. The Homeowners Association (HOA) for the condo building will pay for any problems that come up outside of your unit. The drawback is you will need to pay HOA fees that will cut into your profit.
A single-family house can be a better investment than a condo in terms of the profit margin since there are no HOA fees, however, you will need to be willing to commit more time to managing the property since there are more issues that will come up. For example, if you own a condo, you will not be responsible for covering damage to the roof, but you will need to handle those types of issues when you own a single-family house. An additional benefit for a single-family house is tenants often tend to stay longer in a house than a condo. Typically, tenants stay in a house three-to-five years compared to two years for a condo.
Another option is buying a duplex, triplex or quadriplex. You will need to invest more money to purchase one of these types of multi-unit properties as well as spend a lot more time managing these properties and all the tenants. However, the rate of return should be higher. If you live in one of the units, then the main benefit is the rent you collect from your tenant should cover your mortgage payments.
Once you decide which type of property you would like to buy, consider whether you would like to manage the property yourself or hire a property manager. If you would like to pay someone else to manage your property, you will need to ensure you have enough profits to do so.
Next, it's time to start looking for properties. Set the parameters accordingly for the type of property you want. Create a spreadsheet that calculates the income and expenses, and figure out what your Cash on Cash Return on Investment would be. It should be at least 10%. Sample tables are at the bottom of this post.
Once you have crunched the numbers and believe you will be profitable, make sure to someone you know who has experience in real estate. See if they agree. If they do, then start calling real estate agents and find out more information about the properties you found on Realtor.com.
Overall, it takes a lot of patience to find a solid deal, but keep at it. It will be worth it! Once you have agreed to terms for a property, contact Conventus for a loan!
The information provided in Conventus BLOGs and accompanying material is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. Conventus does not make any guarantee or other promise as to any results that may be obtained from using our content. Conventus makes no representations as to the accuracy, completeness, correctness, suitability, or validity of any information on this site and is not liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Content contained on or made available through the website is not intended to and does not constitute legal advice or investment advice and no attorney-client relationship is formed. Your use of the information on the website or materials linked from the Web is at your own risk.