3 Steps You Should Take After You Buy Your First Property
You Finally Went for it, Now You Own an Investment Property!
If you’ve followed us through the entire Investment Purchase Process (check here to see our posts), and you’ve been following our advice, you have yourself a nice shiny property! Well, wait a minute, it might not be exactly “shiny” but it’s an property none the less. Why didn’t I call it an investment property yet? Well, you don’t really own an “investment” property until you start trying to make it work for you!
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1. Get Organized (Documentation, Business Formation, Financial)
Congratulations! It may not be obvious to you yet, but you are now a business owner. A real estate investment is a business, especially if you are going to buy and hold, and take renters. You’re going to want to protect your new asset from liabilities that the new tenant could bring upon you. Check out our post Asset Protection: Don’t Get Sued, Form an Entity for ideas on forming a LLC or corporation to protect yourself.
(Remember, I am not an attorney, nor do I play one on the internet, so please contact a real estate attorney to make sure your real estate business is set up to grow and take off like a rocket! It’s better to do it now than to have to go back years later and do a major course correction.)
Another key part is organizing all of your documentation. Get a file cabinet (or clear some room in an existing one) and store your closing statement from the bank, title insurance policy, mortgage payment information, and Homeowners Association information if this applies to you.
You will also want to get a system together for tracking finances since real estate is definitely a numbers game. The two you should look into are Quicken Rental Property Manager or QuickBooks Online, both by Intuit. We aren’t affiliated with them in any way and we don’t get any kickbacks from them. We use Quicken for tracking our rental property investments and QuickBooks for tracking AssetRover, LLC. We’ve found both products to be extremely helpful.
2. Plan and Prepare
This hopefully goes without saying for most people, but once you purchase that investment property, you don’t just bring potential tenants in immediately. You need to get the property “rent ready” by cleaning the home and making sure the appliances and other amenities are in good working condition.
Whether or not you use a property manager, you will want to take photos of the property after it’s cleaned and make a list of everything great about your property. Do you have a breathtaking backyard overlooking a fully stocked fishing pond? Do you have state of the art appliances, including a sideload washer and dryer? Understanding these features will prepare you or your property manager for great advertising that captivates the attention of your tenant.
Flippers have an entirely different plan to follow. If you are flipping the property, you will want to engage contractors or roll up your sleeves and get ready to make the improvements yourself. Manage the rehab process closely or get a general contractor to supervise this for you if the renovations are major. Staying within your budget is critical to a profitable flip–a good plan with sound preparation will get your property on the market faster, with a rate of return you can be proud of.
3. Advertise Your Property
If you bought this property to rent out, you’ll want to be strategizing with your property manager or doing some advertising on your own. If you are flipping it, your rehab effort should be complete and you should be getting potential buyers lined up. If you need a tenant, this is the time to think hard about your advertising plan if you are not using a property manager. Craiglist is often the “go to” standard in our modern internet age along with ApartmentGuide.com, while the other big online real estate sites will help with these listings too. Yes, even your local newspaper sites might still be relevant.
When advertising your property, use words and adjectives that’ll really help you get a renter such as “granite”, “state-of-the-art”, “stainless steel appliances”, “vaulted ceilings”, etc., according to RentalsOnline.com. Use the list you came up with during the “plan and prepare” stage to create a compelling advertisement for your rental or to attract a host of buyers for your fix and flip.
If all has gone well, you will be selling this property for a profit or finding a great tenant to live in your home and give you positive cash flow to boot. Screen your tenants properly, do background checks, and have your lease reviewed by an attorney if you are going it alone. Soon you will have a happy tenant in your property, earning you positive cash flow and even paying the mortgage for you. It truly is a great feeling to be a real estate investor!
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Before you leave:Don't forget to check out our free rental property calculator. This will be a valuable tool in your arsenal as you analyze your existing or potential rental properties.
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