Buying your first Phoenix single-family rental property can be an exciting experience. All investments are subject to the same kinds of dangers. To guarantee that your first investment property purchase in Phoenix is as profitable as you want, you should carefully consider several important factors. To succeed in purchasing your first rental property, you need to clearly understand certain things, such as your target tenant demographics, the type of rental property you wish to focus on, and how you will finance your purchase. In this post, we will talk about these essential aspects and equip you with the knowledge you need to have a successful first rental property.
Define Your End Goal
When you purchase your first single-family rental home, it is crucial to establish clearly defined end goals. Before beginning your property search, it is in your best interest to first spend some time defining the qualities that will make your investment property successful. One example would be to look for homes in a specific location that meet certain criteria, such as the number of bedrooms needed or the required square footage. Alternatively, you can focus on a specific renter demographic, such as college students or retirees. By understanding the specifics, you can refine your search criteria and locate potential properties faster.
Prepare Your Finances
In addition to knowing what features you desire in a property, it is vital to prepare financially before you purchase an investment property. Before starting your property search, it is recommended to pay off your personal debt and save for a down payment. Decreasing your personal debt can increase your chances of securing better loan rates, while almost all mortgage loans for an investment property will require a 20% down payment. In spite of how important it is to prepare financially, you should be wary of high-interest loans or mortgage products that seem too good to be credible. By getting approval from a reliable mortgage lender, you’ll be ready to capitalize on the investment opportunities as they arrive. Focusing on financial fitness will give you the confidence to purchase rental property when the time is right.
Crunch the Numbers
The search for the right property can now begin after the preliminary steps are completed. It would be best to run a series of numbers on each prospective property, including your margins, operating expenses, and expected return, before committing to any of them. This is where a lot of new investors make costly errors.
New investors sometimes fail to factor in all of the expenses associated with buying and preparing the rental property for lease, as well as ongoing property management, maintenance, and vacancy costs. According to experts, a margin goal of 10% and a 6% return in your first year means you have a profitable investment.
Stay Objective
It is critical to bear in mind that an investment property is just that, an investment. It is unwise to become emotionally invested in a specific property or let your emotions control your actions. It is also possible that the house won’t meet your specific needs. For your first investment, industry experts suggest opting for low-cost properties in high-demand areas. It is best to avoid fixer-uppers if you’re not a seasoned home remodeling specialist or know of a reliable contractor who will work for less than the going rate. Your first single-family rental property should be seen as the initial stride towards a long and profitable investment career rather than a final objective. Doing so will help you stay the course and ensure that your investment properties continue to generate income.
Design a Management Strategy
Lastly, keep in mind that buying a rental property is just the first step. To ensure a successful return on investment, you must have a proactive management plan implemented. This is where hiring a great property management company can help. As local market experts, property managers can assist you in finding off-market investment properties, analyzing market conditions, setting rental prices, and much more. In fact, as more seasoned investors will tell you, the right property management company is an invaluable partner in profitable rental property investing.
If you have found the right investment property, ensure that you pick the best Phoenix property management team. Contact RPM Exclusive at 480-716-7899 today!
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