Purchasing your first Palmdale single-family rental property can be a thrilling experience. However, just as with every investment, there are risks. We want to help you with your first investment property purchase in Palmdale so that it’s as profitable as can be. Let’s discuss a few ways we can achieve that! Your first rental real estate purchase will be even more rewarding and fulfilling if you pay attention to the details to follow.
First off, before you decide to purchase a single-family rental home, make sure that you have clearly defined end goals. There are several features to be found in investment property. Determine which ones you are looking for before you search for a property. Such as, looking for properties in a certain area, with a specific number of bedrooms, or minimum square footage. By knowing the specifics, you can refine your search criteria and locate potential properties faster.
While it’s important to identify which features you want in your property, it is also just as important to be financially prepared to purchase an investment property. A piece of advice from industry experts is to pay in full any personal debts so that you can start saving up for a down payment. Afterward, you can start searching for a property. This is a good idea since reduced personal debt will help you better qualify for more favorable loan rates since all mortgage loans for an investment property will require a 20% down payment. Make the necessary arrangements for advance financing, but don’t forget to be on the lookout for those high-interest loans or mortgage products that seem a little too good to be true. By prequalifying with a reputable mortgage lender, you will be ready to seize the investment opportunities as they arrive. By making financial readiness a priority, you can more confidently buy that rental property when the time comes.
When you’re done going over these important preliminary steps, you can begin your search for the right property. When on the search for a property, never forget to run a series of numbers on each prospective property, including your margins, operating expenses, and expected return. It’s not unusual for new investors to commit this error.
New investors sometimes forget to include all of the expenses related to purchasing and preparing the rental property for lease, as well as any ongoing property management, maintenance, and vacancy costs. Industry experts suggest a margin goal of 10% and a 6% return in your first year means that you have a profitable investment.
However, don’t get too “invested” in an investment property. After all, at the end of the day, it is only that — an investment. Getting attached to a particular property or allowing emotions to guide your decisions is not a good idea. Also, the property you buy is not necessarily a property that you would ever live in yourself. For your first investment, industry experts recommend opting for low-cost properties in high-demand areas. Unless you are a professional at home remodeling, or you know a quality contractor who will do the work for less than the going rate, steer clear of fixer-uppers. Your first single-family rental property is the stepping-stone to a long and profitable investment career, not the ultimate end itself. With this in mind, you steady the course and keep your investment properties in the black.
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