Have you ever thought about owning a rental property in Texas? If not, you definitely should.
Owning a rental property allows you to earn passive income that's safe from the effects of inflation. Plus, while you make income from rent checks, your property appreciates. Eventually, you can sell it for a huge profit.
The only question is, how do you buy a rental property? It's easier than you may think, actually.
This guide explains every step of the process from start to finish. Learn everything you need to know in just 5 minutes with this complete guide.
1. Prepare Yourself
The first thing you need to do is to understand what you're getting into. Some people mistakenly think that there's no risk involved in being a landlord. In reality, there are a lot of things that can go wrong.
That said, a lot of issues can be prevented through diligent management of properties and tenants. But there are other risk factors you can't control, like natural disasters that damage your properties.
You also can't predict the behavior of your tenants. They might:
- Damage your property
- Move out earlier than they promised
- Fail to pay rent
- Require an eviction
Your legal rights and your insurance may offer some amount of protection. Still, these issues prevent you from getting the income you were expecting. Even if you're entitled to recompense, it may take months before you see any of it.
2. Know Your Responsibilities
Speaking of legal rights, your tenants have rights, too. Make sure you know all of your responsibilities as a landlord so that you don't get into trouble.
Furthermore, these duties come with hidden costs of their own. Take these into account when you're considering the cost of your investment.
3. Choose a Location
When choosing a location for your investment property, consider the neighborhood. Is the neighborhood in good repair with a thriving population?
Are a lot of people moving into this neighborhood? Or is the area run-down with more people moving out than moving in?
Look into future construction projects in the area, too. What effect will these projects have on residential property values? The point is, choose a location that's on its way up, not down.
4. Finance the Property
Are you planning to buy the investment property with cash? If not, you'll need a Fannie Mae or Freddie Mac agency loan.
To qualify, you'll need good credit, 720 or higher, plus a downpayment of 20%-25%. Also, know that interest rates for agency loans are higher than those for traditional mortgages. Remember this when calculating the monthly cost.
5. Don't Forget About Insurance
So many landlords forget this step until it's too late. Don't be one of them. For your own protection, it's crucial that you obtain landlord insurance.
6. Choose a Property Management Company
You should also recruit the help of a competent property management company. Their diligence prevents many problems that can hurt your bottom line.
Besides, a single landlord can only handle a finite number of properties. Don't get in over your head. Hire property management services before you start falling behind.
Follow These Steps to Buy a Rental Property in Texas
Keep this checklist handy so you don't forget what you've learned here today. Then, follow the steps above to buy your first rental property in Texas.
Most importantly of all, don't forget about property management. HomeRiver Group helps you maintain your rental properties and gain new tenants. Contact us here to get started.
