Mark Westlock, Licensed Agent, of Meramec Valley Properties Management (“MVPm”) operates a residential property management company in St. Louis, Missouri. In the article below, Mr. Westlock explains the ins and outs of acquiring a rental property.
Often, people build wealth through investing in rental properties. Not only does this provide a monthly stream of income, but historically, real estate has proven to be a solid investment. How does one acquire and invest in rental property? In the article below, Mark Westlock of MVPm explains.
To invest in rental property, one must research the market, secure financing, find a real estate agent who monitors new listings and acts quickly when good investments hit the market, and partner with a good property management company to vet potential renters and take care of the day-to-day maintenance and operations of the rentals.
To the novice investor, securing a rental property may seem daunting. It may seem impossible to even know where to start. Meramec Valley Properties management reviews how to acquire and invest in rental property and start profiting right away.
Research the Market to Begin your Rental Property Investment
Research is the most important step in beginning a journey of owning rental properties Mark Westlock of MVPm explains. It is important to be familiar with the market and with statistics of the neighborhood. There are many sites that offer free information on current listings and past sales, such as Realtor.com.
Meramec Valley Properties Management reviews how easy it is to sort listings based on type (single family, duplex, triplex, etc.), bedroom count, price, and many other criteria. This can provide a general feel for the market and valuable insight into how much capital will be needed to get started.
Another important consideration is rental rates. Meramec Valley Properties Management reviews that browsing rental offerings online provides a snapshot of the potential gross monthly income for a variety of housing types in different neighborhoods. A good investment-oriented real estate agent will be able to help an investor determine which properties will provide a good return on investment based on the price of the home and the projected gross monthly income explains Mark Westlock of MVPm.
Also consider crime statistics in the neighborhood. Sites like Homefacts.com give an overview of crime rates for a city. Neighborhoodscout.com provides very specific data for individual neighborhoods to help investors and prospective homeowners make decisions. This site provides valuable information for free; however, some of the most sought-after data requires a purchase to access.
Finally, make sure you have a certified Property Inspector inspect the property prior purchase. I’ve seen investor cash flow negative their first year because of important maintenance issues (ie. Roofs, siding/brick work, electrical, plumbing, decks, etc.). You wouldn’t buy your primary residence without having it inspected first so why would you not inspecting your potential investment.
Secure Financing
Meramec Valley Properties Management encourages investors to shop for best mortgage rates with lenders. Some lenders (usually local) may be more likely to finance investment properties that big national lenders will not. Also, the more money you can put down (or show that you have in reserve) can help with lending approval. Banks love having an additional deposit account with clients they are lending to. Also, be sure not to overleverage/overborrow. You need cash flow to cover that rainy day (ie. New HVAC, make ready, new flooring etc.).
Investors should expect to have at least 20% down for their rental. If there is plenty of equity in their primary residence and a higher monthly payment won’t pose a strain on the investor’s budget, borrowing against their primary residence may be a viable option to finance the new property explains Mark Westlock of MVP Properties Management. However, having that home equity loan available that, “rainy day” as mentioned in the previous paragraph is another option for cash reserves.
Find a Reputable Agent who has Experience with Rental Properties
There is nothing to lose in working with an agent. Agents work for the client, meaning that they are just as eager as the client to find the perfect investment property. Meramec Valley Properties Management reviews that having success with an agent usually means that the client will come back to them in the future.
In selecting an agent, prospective buyers should interview until they find someone who they are confident is up for the task. The agent should know the market well, including which neighborhoods are most profitable when it comes to return of investment specifically for rental properties. MVPm is affiliated with ReSource LLC which has numerous agents experienced with property investors (some of these agents are also property investors). Also, we work with numerous other agents from other Brokerages to help their clients achieve their goals.
Meramec Valley Properties Management reviews that the agent should also be willing to actively research on behalf of the client and contact the client when possibilities arise. An agent who is too busy to act and show properties right away may cause prospective buyers to miss out on great opportunities.
Partner with a Reputable Property Management Company
There nothing worse for an investor than discovering that their new rental property has been trashed by renters, with thousands of dollars’ worth of damage that neither renter’s nor homeowner’s insurance will cover.
In addition to this, landlords often must drop whatever they are doing at any time, day, or night, to tend to problems with the property. This may include a bathroom pipe that is spewing water and may potentially flood the home at 3:00 AM, or the tenant that constantly calls asking to have their personal washing machine fixed, even though it is their own responsibility per your contract.
Finding a reputable property management company is non-negotiable. Meramec Valley Properties Management reviews that the benefits make the costs negligible in comparison. Management companies will vet potential renters, checking their credit scores and ensuring their references aren’t simply friends or family members trying to do them a favor. They will also handle the maintenance of the property, so the investor does not have to deal with renters personally.
Final Thoughts on Rental Properties
Real estate is historically a great investment to make. It is possible to be very successful and build wealth by purchasing and renting out properties, but it is important to go about it the right way. Do the research, get the right financing, find the right agent, and partner with an excellent property management company. Then, find success in this new venture!
