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7 Important Tips for Buying a Rental Property

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Investing in real estate presents you with several benefits. It produces cash flow to supplement your current income. Your investment will appreciate over time, and you can claim it on your taxes for tax breaks and deductions.

If you’ve made the decision to purchase rental properties, then you need to know everything you can about real estate investments and how to be a landlord. Buying a rental property is a crucial step, but how do you get the process started? How can you ensure you’re making the right decision and will become a successful investor?

In the guide below, you’ll find the answers you’re looking for. Continue reading for a list of investing tips you don’t want to miss.

1. Understand Landlord Responsibilities 

Before you buy a rental property and find a tenant to live in it, it’s important you first understand what your responsibilities are as a landlord. Check your state’s landlord/tenant laws to have a full understanding of all the legalities. Then, ask yourself how handy you are.

Can you make basic repairs around the property? How will you handle larger maintenance requests? Are you willing to communicate with tenants and devote time to them when needed?

There’s a lot that comes with owning a rental property, maintaining it, and building relationships with tenants. Make sure you’re prepared for what lies ahead before jumping into it. Becoming a real estate investor opens the door to many opportunities, but you must come prepared and willing to put in the work.

2. Open a Business Account 

As an investor, you’ll want to open a separate bank account for business finances. Keeping your rental property revenue and expenses separate from one another will come in handy when it’s time to file taxes or figure out your business versus your personal finances. Combining both finances into one account can lead to confusion down the road.

Speak to your bank about opening a small business account and what your options are. There may be a few different types of business accounts, and you’ll want to take your time selecting the right one for you.

3. Save a Large Down Payment

When investing in a rental property, you’ll need to save up a large down payment. It’s typical to need a larger down payment for investment properties than owner-occupied ones. The reasoning for this is that the financing for rental properties is a bit more complicated.

All situations are different, but it’s ideal to save around 20% of the total cost for the property. If needed, find financing for the down payment, such as a personal loan. Do keep in mind that your credit will come into play here.

However, with a good amount of research and time invested, you’ll be able to find the right lender and financing option for you.

4. Research the Location

You’ve searched for rental properties for quite some time now waiting to find the right one within your budget. You finally find a good option, but before you make the purchase, you need to research the location. Don’t buy an investment property in a neighborhood you’re not familiar with before learning more about it.

You should know about the local real estate market and housing trends in that area. Is the area declining or picking up? A neighborhood that’s been developed is a great option.

You want to choose a neighborhood where the population is growing, where there are multiple schools, restaurants, shops, and other places to go and things to do. A booming neighborhood will give you the best return on investment (ROI).

5. Purchase Landlord Insurance

Don’t start renting your property out before protecting it. Now is the time to secure both homeowner’s insurance and landlord insurance. What does landlord insurance cover?

If tenants damage the property, if an injury happens while on the property, or if you lose rental income for various reasons, landlord insurance will cover it. It’s also beneficial to check with your homeowner’s insurance about what’s covered when the home’s rented out.

Some homeowner’s insurance policies might not cover certain damages or losses while tenants are residing in it.

6. Hire Property Management Services

Managing rental property on your own is doable. However, if you have other obligations to attend to during the day, then you might require some help. Hiring a property manager like those at will not only give you more free time, but they’ll also handle a wide variety of tasks.

For example, a property manager can list your property for you, advertise it well, find and screen tenants, write up a lease agreement, handle rent collection and evictions, handle maintenance requests, and more. Plus, many property managers have existing relationships with different contractors who can complete different projects around the property for you when needed.

7. Consider Costs of the Unexpected 

As a landlord, it’s crucial to plan for maintenance costs and the cost of upkeep. It’s also crucial to plan for unexpected costs. Put aside money into savings for emergencies and other unexpected expenses.

To build an emergency savings account, set aside 20-30% of your rental income. If a natural disaster damages the property, or if a pipe bursts, causing water damage; then you’ll have the funds to make needed repairs.

Keep These Tips in Mind When Buying a Rental Property

Are you planning to buy a rental property? Becoming a landlord is a great way to supplement your income. To be the best landlord possible and generate healthy revenue from this investment, you’ll want to conduct research and come prepared.

Use the information given in this guide above to get the process started. Many entrepreneurs can become successful by buying a rental property, but what else is out there for entrepreneurs? Check back here on a daily basis for more posts on entrepreneur topics!


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