Rental real estate investing has been on the upswing over the last few years. As the housing market has continued to improve and opportunities for house flipping have become more competitive, buy and hold real estate has stepped up as an excellent alternative.
Buy and hold investors enjoy a number of benefits unknown to flippers, including regular monthly income, landlord tax benefits, and the security that comes with being able to watch the market for a few years in order to time your sale perfectly. If you’re thinking about becoming a buy and hold investor, here are the five main steps you’ll need to take.
- Research
First and foremost, you’ll need to do a lot of in-depth research to determine which neighborhood will be most lucrative for you to invest in. You may need to travel away from your local area to find the best neighborhoods for investing. Figure out what people in your chosen area are looking for, and start making some basic calculations about your expected expenses versus your predicted revenues.
- Find a realtor and start hunting
Once you have a solid sense of what your investment should look like in terms of the numbers, find a realtor you trust and start looking for ideal investment opportunities. You’ll most likely want to find a small apartment building or a house to start with, and you’ll probably want to look in areas that appeal to young families, as families tend to be stable, long-term tenants.
- Secure funding
In tandem with your real estate search, you should talk to a private money lender about securing rental real estate funding. Working with a lender will give you the freedom to make a more lucrative investment while lowering your overall risks. Be sure to find a lender who can offer you competitive terms and provide you with guidance throughout the investment process.
- Plan any renovations and make a budget
Sticking to your budget is going to be one of the biggest challenges you face, but being diligent about your budget will pay huge dividends in the long run. Keep detailed accounts of all of your expenses and do your best to stay on schedule. If your property needs renovations, find a contractor you can count on and make sure you’re working on a timetable that is reasonable and efficient.
- Plan your marketing strategy
Make sure you have a plan in place to attract tenants to your property quickly. Advertise on local websites and think about what type of marketing investment you’ll need to make. Remember that every day your property sits vacant, you’re losing income. Be prepared by looking for tenants early and aggressively.
