6 Tips on Purchasing Your First Rental Property

  1. How’s your credit?
    1. Are you actively monitoring your credit and taking steps to improve/maintain your current score? Ideally, your credit score is 680 or above. If it is not, you may want to start monitoring your credit. Learn what dates each of your accounts are being reported to Equifax and TransUnion. Work hard at keeping your balances below 75% of the limit, especially before they report to your credit bureau.
  2. Step up your financial game
    1. Are your savings just sitting in a basic savings account? If so, consider researching higher interest rate savings accounts. There are a lot of virtual banks that offer higher returns on savings accounts than your current bank might be offering. Do your research.
    2. What about your checking account? 
      1. Are you getting cash back on your spending? There are some cards that will provide cashback on your regular day-to-day purchases. 
      2. Also, look for an account that will round up your purchases to a certain dollar amount that you predetermine and tuck those funds into a savings account for you.
  3. Simplify your life
    1. Look over your financial statements for the last 3 months. Where can you cut your spending? What subscriptions do you pay for that you aren’t using? Be ruthless. 
    2. Look around your house, all those things you thought you wanted that are now collecting dust, sell them. Facebook marketplace is your new best friend.
    3. Learn to live simply now so you can afford the life you want later.
  4. Make your current situation work for you, literally 
    1. If you own a home currently, consider accessing the equity in it to purchase your first investment property. With current market conditions, your house could be worth a lot more than what you bought it for. Put that equity to use.
    2. Don’t have equity in your home? Maybe you have an extra room. Consider renting out a room in your house to increase your monthly cash flow. Set these funds aside to purchase your first investment property. 
    3. If you don’t own a home, think about making your first home purchase a duplex, triplex, etc. Your first home is not your ‘forever home’, sorry to break the bad news. This is a great way to enter the real estate market with minimal down payment requirements. 
  5. Study your market! 
    1. Not every house makes the perfect rental. You need to know what rents are feasible in your area, roughly what to expect for mortgage payments, property taxes, insurance, and maintenance to ensure the property will cash flow. Do a little homework first so you buy smartly. 
  6. Take control of your financial future
    1. Action items today that will help get you where you need to be. Get out of your comfort zone. Deal with the items you have been neglecting or procrastinating on. Write out actionable goals and keep yourself accountable to them. An investment property may fall on your lap if you’re, but you need to be prepared to run with it. That means having your financial house in order first.

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