There are various financial risks to consider when it comes to purchasing property, including financial aspects, such as Accounting Depreciation vs Tax Depreciation. If you are thinking about purchasing real estate, there are numerous things to look out for to ensure that it becomes a sound investment. Real estate experts agree that, as with any investment, your first property investment needs to be well-versed before taking the plunge with thousands of dollars. Read on to learn more about five things to consider if you want to buy your first rental property in 2021.
1. Are you ready to be a landlord?
As a landlord, you will need to know your way around a toolbox. In other words, you will need to be good at repairing things around the house. Understandably, you could call a plumber or a mechanic – or you could also hire the services of a property manager. However, all these options will put your profits in a compromising manner. Therefore, it is recommended to know how to conduct repairs around the house, so you can save money in the long run.
As you will add more rental property to your portfolio, you will be seeking the services of a property manager. However, it is recommended that you are familiar with being all handy for your first rental property and become the perfect landlord.
2. Avoid Personal Debt
It is recommended for an average first-time investor to avoid personal debt. In other words, if you have student loans and unpaid bills, such as medical bills, it is recommended that you don’t invest in rental properties at all. In case of personal debt, refrain from investing in rental property as it will do you no good even if it is part of your investment strategy.
As a first-time investor, you will need to be cautious while ensuring to maintain a safety margin. If you lack the cash to pay your debt, investing in a rental property is not for you.
3. Find the Right and Profitable Spot
If this is your first time investing in a rental property, we recommend that you don’t invest money without researching the potential benefit of the location. Your location matters a lot when it comes to rental property. Search for a location that is more likely to pick up steam in the following years. Choose a location or city where the population is expected to grow. The rental spot needs to be representative of a potential opportunity for investment and growth.
While choosing the location, you might want to look for a pot with low property taxes, decent educational institutes, cinemas, shopping malls, restaurants, etc. The region should also include access to public transportation and incorporate a growing job market. In other words, it should be excellent for living, working, and relaxing, an ideal place to reside for the public.
4. Beware of Rental Properties with High-Interest Rates
As we pass through 2021, we have started witnessing more effects of the pandemic’s impact on the local and global financial system. The rental property costs might have been relatively cheaper in 2019 and 2020, but the interest rates are higher than before. And when it comes to rental properties, you will want to have a low mortgage payment so that your monthly profits don’t take a serious toll.
5. Benefit From Landlord Insurance
As a newbie landlord, you will also need landlord insurance besides homeowners insurance. The landlord insurance covers many important aspects, such as property damage, liability protection, etc. The landlord insurance also covers injuries that potential tenants or visitors might suffer due to maintenance issues at the property.