Most of us have something holding us back from investing in rental properties, whether it be money, time or motivation. Some investors have just picked up their first book, others have researched the subject extensively, some may be searching for their first properties, and others are looking to add to their portfolio. No matter what stage they are in, most investors need something to buy rental properties. I think investing in real estate is one of the best ways to become wealthy and retire early. What do you need to buy rental properties?
I have made at least a 20 percent cash on cash return on each of my long-term rentals in the first year. My complete guide to investing in long-term rentals gives details on how I do this, financing I use, where to find properties and detailed figures. While there are many people who want to invest in real estate, very few do so on a serious level. It can take some investors years to buy their first property and some never jump in the game. No matter what your experience level is, there is always something you need to buy rental properties. Lets take a look at possible road blocks and how to remove them!
Do you have enough money to invest in rental properties?
Money is the most obvious reason most people don’t buy rental properties. It takes a lot of money for a down payment, and even more money to pay for closing costs and repairs. If you are just starting out, it may not be as expensive as you think to buy rental property. Here are some ideas on how to buy a rental property for less cash.
Refinancing your principal home or an investment can be a great way to get more cash if you have equity. Many people say you should pay off your principal home as quickly as possible, but I think you should buy rental properties instead.
Good old-fashioned saving is a great way to get some extra cash. Most wealth experts suggest saving at least 10 percent of your income for investing, I save much more than that. If you aren’t saving at least 10 percent, look at your budget and see where you can cut down on expenses. If you don’t have a budget and know exactly where your money is going then you should start now! Many people are surprised how easily they can save a lot of every month just by looking at what their current expenses are. Just shopping for new insurance, cable and internet can save hundreds a month.
If you have rentals, you can also apply your extra cash flow towards buying future rentals. I prefer to pay off loans quickly with my extra cash flow, but my number one goal is to buy as many properties as possible.
The last option is to make more money! If you are stuck in the grind not making as much as you want, look at your job, how happy you are, and if there is something else you could be doing to make more money. You can also look at ways to bring in extra income outside of your job.
Do you have enough time to invest in rental properties?
Time is another obstacle many of us cannot overcome. We have jobs, families, activities and we have to eat and sleep! It can be difficult to manage your time well enough to find time to look at properties, make offers and market to buyers and sellers. No one ever said it would be easy to become a real estate investor. Look at how you budget your time as well as your money. How much time do you spend on your daily activities and where can you save time? Once you start looking at what you do all day and how long it takes, you will see areas for improvement just like with your spending habits. If you have a 9-5 job with no flexibility, look into creating flexibility or a new job. The Four Hour Work Week is a great book on how to save time. If you own a business or are self-employed, look into hiring people to do your busy work for you. Not only will you save time for investing, it will free up time for improving your business and making you more money! If you make more money, you can buy rental properties!
Do you need to take your first step towards investing in rental properties?
Many first time investors don’t know how to start getting in the game after doing their research. There are a couple easy things you can do to get in properties and begin to form your strategy and buying criteria. Find a great Realtor who will send you deals and show you homes. Go look at houses with the Realtor and make lists of repairs needed, get bids for repairs, check out rents, talk to property managers and calculate your cash flows and ROI on specific properties. None of this will cost you any money and it will give a you a feel for what you want, what you can afford and what your returns will be. You can never start this step too early! Even if you are just starting to research your strategy, the sooner you get in houses, the sooner you will be in a place to actually buy rental properties.
Would becoming a real estate agent make it easier to invest in rental properties?
Getting a Real Estate license can be a huge plus when investing in real estate, but don’t let it hold you back. If you are thinking about getting your license or in the process of getting your license, you can still begin your investing career. Even if you aren’t ready to buy yet, you can use the steps above to prepare yourself while getting your license.
The point of this article is to get started! By getting started, I don’t mean read a book or do some research online. Physically start taking steps to get your investing career moving in the right direction. It is really easy to look at houses that are listed which doesn’t cost you anything. It is really easy to look at your finances or how you spend your time, you just need to do it! The sooner you can buy properties, the closer you are to passive income and freedom. Every time you buy rental properties, you are better off financially.
For more information on how to buy the best rentals which will make the most money, check out my book: Build a Rental Property Empire: The no-nonsense book on finding deals, financing the right way, and managing wisely. The book is 374 pages long, comes in paperback or as an eBook and is an Amazon best seller.