5 Steps to Take Before Buying an Investment Property

Investment properties are enticing due to the idea of a passive income. A passive income is when you earn money without expending effort. Since a buyer does not materially participate in real estate, it is considered a passive investment. While property investing can be tempting, you must take calculated steps before you buy a property. 

1. Research & Tour

Unless you have a real estate agent, you will need to research available properties to invest in. You might consider investing in single-family homes, duplexes, or land you can build on or sell later. As you research, you’ll need to know the up-and-coming areas, the best neighborhoods, and the places you can afford. When you find properties that interest you, take a tour to ensure the property is in good condition. During your tour, take notes on anything that concerns you or that you would have to repair if you did buy the property. 

2. Inspect

Even if you didn’t notice any red flags during your tour of the property, it is still advisable to hire an inspector to assess the property. Home inspectors will find any issues, such as mold, water damage, or the need for a new roof. Sometimes a home inspection will alert you to possible high-risk investments. However, if the issues discovered in the home inspection aren’t enough to scare you away, you can consider making a lower offer on the house. 

3. Appraise

To make a fair offer on a property, hire an appraiser to assess the value of the home. Property appraisals will inform you of the past, current, and predicted future value of the property. This can help you make an informed offer on the house instead of guessing or simply paying the asking price. Having the property appraised will also help you decide how much to charge for monthly rent. 

4. Landlord Insurance

Being a rental property owner comes with risks. If you plan on renting your property, you will likely need a landlord insurance policy. Landlord insurance is similar to homeowners insurance, but it typically only helps cover damages to the building or other structures on the property. Landlord insurance can also protect you if a tenant gets hurt on the property. Before you buy a property with the intent of renting it, get a quote on the insurance policy so you can have an accurate idea for the rent to ensure that the property will produce positive cash flow. 

5. Property Management

Before you buy a property, you should know how much work a rental property can be. Since the appeal for a rental property is to make a passive income, you don’t want to do more work than necessary. To make rental properties easier to manage, you can hire a property management team such as Rooftop Rentals. We will help you take care of the property and find renters to fill the unit. Call us for a quote today!. 

The idea of making a passive income is exciting, but owning a rental property is still a large responsibility. Avoid jumping into real estate investing simply because a house is a “good deal.” These five steps can help you make sure you are ready for the commitment it takes to find and purchase a rental property.