I'm looking for ways to learn, and buy my first rental property, but I've got a few things that I don't understand. I'm looking to buy a small 1 unit, (1 bed , 1 bath) flat.
- Do you buy the flat (without furniture) and than rent it out as is? Without any furniture? Because in that case, I would have to lower my rent because similar flats are renting with similar price but WITH furniture. (bed, wardrobe, microwave oven, etc.) Or do you buy furniture separately?
- Do you find a deal and buy a flat that is in "ready to move in" state? Or do you buy and than do some reparation? If so, how do you still manage a positive cash flow?
- And finally, from all those answers, wich one would you recommend for a beginner as his first ever deal?
I would like some experienced investor's answers, but obviously everyone's help is appreciated!
@Marko Kitonjic it's unusual to buy a place that's already furnished unless it's a short term vacation rental ...at least here in the States but anything can be negotiated if you wanted the furniture . It would be more of a negative than positive to long term tenants as they have their own furniture & might not like your taste.
People buy places that are rental ready and other people buy places that need work. It depends on the price & deal you negotiate. You'll have to analyze the numbers and see what works to give you the most value & cashflow.
As for a beginner I would recommend a place that didn't need a lot of work unless you are handy. Contractors tend to have a bad reputation for being shady & best to have your first deal go smooth so you don't get turned off to being a real estate investor. Your first deal should be small as you learn so much going through the process and are only going to be better on the next ones.
I've never been to your country so I do not know the market. However, I do know that most people in NY prefer to rent an empty apartment. The rent is less than a furnished apartment and they want the apartment to reflect their personal style personality. Most who rent a furnished apartment are short term tenants so turnover is higher. It can take a little longer to rent out these apartments as well. These type of tenants normally want the top of the line appliances and a well appointed room. Top dollar goes to the ones that have a nice view, close to the train, and in a relatively safe neighborhood.
I've bought a new property and I am about to buy two properties that will need renovation. For a newbie I say it depends on you. If you don't know how to fix anything or have a friend or a good crew to fix things for you at a reasonable price, then I say buy ready to move in. If you know how to do things yourself and know others that can help you then you can buy an underpriced rehab. When getting estimates for rehab always add at least an extra $5000-10000 to what they say because surprises can happen. Also add some weeks to that as well.
To maintain a positive cash flow the rent I charge covers my mortgage and bills. I keep costs down as much as I possibly can. I have joined certain real estate groups and gardening groups in my area where I get a discount at certain stores and cheap labor. I have developed relationships with people who are handyman. One guy shovels my snow for food. Another put the air conditioners in for a bottle of wine. I also look for sales, shop at warehouse, wholesalers, etc.
Thank you for all the help and advice!
Ive never furnished any rental (other than refrigerator & stove), that's just another expense, but if that is the norm where you live, then you may want to consider it.. For your first deal, buy something that needs minimal work, just to get your feet wet. If not, make sure you full understand what your getting into, in a construction sense. I am a contractor, and sometimes when you start digging into something you will find unforeseen problems that must be fixed.. Maybe bring a trusted friend who is contractor savvy to check out the place. Anytime I bought a place with furniture still in it, the stuff was junk and had to get rid of it. In my opinion, keep the place clear of furniture, and buy as rent-ready as possible.
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