6 Things to Consider Before Buying a Rental Property

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  1. Can you find renters? This is huge. You might have found a home for pennies on the dollar. You’re so excited that you scored such a great property. You snatch it up, rehab it and list it for rent. But, the market is saturated with rentals. No one’s looking for what you’re selling. Employment is scarce in your market and the need for housing is limited. So, there you sit with your hard-earned investment burning through cash. Don’t make this mistake. Do your research.
  2. Can you get funding? Are lenders turning you down for your investment property? Before hitting up the next lender possibility, stop and think. Why are lenders not wanting this deal? It might not be as ideal as you think.
  3. Do you need management? Sure, a single-family home in an upscale neighborhood is a breeze to manage. But, if you’re investing in apartments or housing in a bad neighborhood, you’re going to need reliable management. Is this attainable?
  4. Do you know your competition? Not only do you need to know what rentals are currently going for in the area to ensure you can make a profit on your investment, but you also need to know what the future may hold. Make sure a luxury apartment complex isn’t opening up next to yours in the foreseeable future. If it is, make sure the market can support both rentals.
  5. Do you have a plan to get rid of the rental? Sure, you have a great rental with great potential income. But, is this a home that will make money when you sell it down the line? Normally, rentals aren’t held onto forever. Make sure you have an exit strategy in place so you aren’t stuck with a poor investment.
  6. Do you have enough money? Not only do you need to make sure you have enough cash flow for a down payment and possible repairs, but don’t forget to set money aside for maintenance and possible future repairs. The last thing you need is going broke investing in purchasing the property and having no money if the furnace decides to croak.

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