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How to Buy a Rental Property

August 27, 2021

Buy Rental Property

There are a lot of investors wondering if they should buy a rental property or perhaps even an apartment building. It’s an exciting prospect, and for many reasons, investment in income property is the best long term play.

Some investors like what they see on the fixer upper rehab TV shows they watch, while others do some quick math in their head, and start feeling the enthusiasm.

Rental property is attractive given how demand for rentals is so high and for the ongoing ROI it generates. And the rising down payments actually helps to keep some competing investors on the sidelines.

Demand is Looking Stronger

The US, UK, German, Canadian, and Australian economies are reopening and rents are rising faster than house prices. Many new renters are priced out buyers.  The Demographics look very good.

Apartments are filling up again post-pandemic and rental houses are in big demand. ROI on rental property might range from 8% to 15%. Within 8 to 10 years you might recoup your full investment, and you’d have a solid, in-demand asset.

New construction and rehabilitation projects are lagging behind, and likely will never catch up. And big money investors are buying the available houses, multifamily units, and diving into built for rent developments. If they want the rentals, it must be good!

Get Educated and Speak to Experts

As you investigate your investment property opportunities in your town or in other cities, you’ll learn a lot as you speak with landlords/property managers/bankers. But to get you moving forward, you might just need to review the general process and steps.

With that understood and with key tasks organized, you’re unlikely to succumb to the downfalls some pessimists warn of. You’ll be investing in the right properties in the best cities, doing financing smartly, managing professionally, and using software tools that let you capture the ROI results you need.

Don’t be an Old School Prisoner

Across the US, Canada, UK, Germany and Australia, there could be several hundred thousand landlords still using spreadsheets and a telephone to manage their properties. They demand cash or paper checks for payment each month and don’t communicate with tenants using modern digital tools. They just wing it month to month.

And when investors see that this is how properties are being managed, they might pass on buying rentals because it looks too messy. Cleaning up the messiness and optimizing profit is what modern property management software tools such as ManageCasa do. These will give you immense power and make managing easy.

Manual, old school property management is complicated and tiresome, and many newbies don’t even know how to process transactions and paperwork like that. Some know little about accounting and others don’t have the time. And with all the rent controls and other anti-landlord legislation going on, the risk is unappealing to many investors. The solution as you’ll discover is education and good tools.

You’ll need a strategy to compete and win some good rental properties. There’s plenty of advice on how to buy rental property online, and there is a list of resources below we hope you can use.

Here’s a simple, easy to understand process to your end goal of owning quality properties and earning a good ROI.

A Simple 16 Step Process:

  1. educate yourself on the bigger picture of property management (read our blog and review our product pages)
  2. ensure you have the patience, poise and determination to be in it for the long run (this is usually not get rich quick, although if you do a good job, someone will want to buy you out)
  3. talk to a tax lawyer about how to optimize your portfolio for lower taxes (taxes could be a significant liability)
  4. determine how much money you have to buy properties and how much is needed for an operating budget
  5. speak to a lender or your banker about how to finance
  6. find a Realtor and estimate costs to purchase
  7. find properties in good, upcoming cities with A or B class units to buy
  8. determine which type of rental property you can manage (houses, condos, apartments, mixed use, etc.)
  9. create a system for assessing properties and the tenants already in them
  10. calculate your expected ROI on the rental property opportunities in front of you
  11. get the property appraised and be stubborn and try to negotiate to buy properties 10% below market value
  12. analyze your potential ROI (strive for 15% ROI) and equity growth for different mixes of rental properties
  13. establish how you’ll manage them and which property management software platform (e.g., ManageCasa) to use
  14. learn all about attracting and leasing to excellent tenants and doing tenant selection well because they are a key asset
  15. build a backup plan in case you can’t evict a bad tenant, suffer losses, or can’t raise the rent
  16. use software to put your work on autodrive to save your precious time and reach peak efficiency

Of course, there are many other tasks such as maintenance, rental marketing, and collecting rent payments to handle too. These tasks above are the key ones to tackle. And there are matters pertaining to business models, revenue models and financing strategies that might come into play. You’re smart, you’ll manage them and become even better — which means higher ROI!

It’s About Making Good Choice at Each Step

The key to smart rental property purchases is about choosing the right type of property, choosing the right tenants, finding good maintenance contractors, automating transactions, and optimizing financial management and accounting.

Keeping the books straight is so important today. Of course, that flows into the decision of which property management software you might use.

Managing properties won’t be too hard unless you have poor quality properties (money pits) and bad tenants. Avoid investing in bad neighborhoods in areas on the decline. The US (Canada, Australia, UK and Germany too) have changed and you’ll want to study the new good opportunities in the best cities in any country to buy property. Many landlords manage remotely.

Definitely bookmark our blog now and keep learning as it’s a really a process of you developing expertise. Your success isn’t due to gimmicks, it’s due to you managing better. Try out ManageCasa’s amazing property management software platform and enjoy managing everything from one interface wherever you are.

Further resources on buying rental property:

  • How to buy a rental property: biggerpockets.com/guides/how-to-buy-rental-property
  • How to Buy Rental Properties: retipster.com/how-to-buy-rental-properties/
  • Landlord’s Guide to Renting: lawdepot.com/law-library/real-estate-articles/a-first-time-landlords-guide-to-renting/
  • Buying and Financing: credible.com/blog/mortgages/buying-rental-property/
  • How to Buy an Apartment Building:  multifamily.loans/apartment-finance-blog/buying-your-first-apartment-building-an-investor-guide
  • How to Buy a Duplex: cardonecapital.com/blog/duplex-rental.html
  • Buying my first Apartment Building: passiveincomemd.com/bought-first-apartment-building/
  • How to Estimate Expenses: fortunebuilders.com/rental-property-investment/

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