The key to avoiding stress while starting your low stress rental property journey is to approach the process with confidence and smart strategies. Sure, doing anything for the first time can be stressful. It’s a big investment, especially when buying your first rental home. But you really can make it happen without overwhelming stress.
Here are my top 5 tips for a low stress and successful first rental property investment.
Take courses, read investment books, attend seminars, or find other ways to gain confidence. I suggest focusing on learning how to select locations, evaluate properties, and understand the rental market. Your success depends on your research and making smart decisions. A low stress investment begins with buying in the right area and doing due diligence.
Your first rental property investment is best done in your area of residence, where you know what’s going on economically. You want to know that the economy will support today’s decision into the future, as this isn’t a short term strategy. Understand who the major employers are, what drives people to move in or move away, and if things look good into the near future.
Sure, now and then you can work with a real estate agent who handles foreclosures and get a good deal. Remember though that these will be “listed” foreclosures on the MLS, Multiple Listing Service. You and all of your competitor investors have access to the same information, so competition will likely drive up your cost of acquisition.
It’s best to buy your first rental property in your own area. You’ll already have an understanding of the local economy, this helps ensure that your investment will thrive in the long term. Understanding key factors like local employers, moving trends, and overall economic health is crucial. This knowledge will lead to a low stress and successful property investment.
Check with property managers and look at similar properties in the area. Compare rental prices to see if the market is strong. You want to have realistic expectations for rental income and vacancy rates. This helps reduce low stress by understanding what to expect from your investment.
Call on ads, drive around, talk to landlords as if you’re a tenant. The most important thing for you to know before the next tip is what you can reasonably and conservatively expect for rental income and low vacancy. For example, let’s say you’re investing in a $150,000 home with a $32,500 down payment. If your mortgage payments leave you with a manageable cash flow of $250/month over expenses, you’re looking at a solid return on investment with relatively low stress.